CRUS Stock Has Big Upside in 2016
Cirrus Logic, Inc. (NASDAQ:CRUS) stock has started to recover after dropping from more than $35.00 in early December to $26.80 in the first trading week of 2016. CRUS stock hit a peak of $44.35 in September 2012 and it made its all-time high way back in 1995, when it soared from around $13.00 to over $55.00 in less than 52 weeks.
Cirrus stock is on a recovery path, as the market appears to have absorbed the Austin, Texas-based chip manufacturer’s lower earnings estimates for the quarter ending in late December 2015. Cirrus confirmed that it suffered weaker-than-expected demand for some portable audio products in the last weeks of December, which will have a significant impact on its revenues for the March quarter.
Cirrus Logic is a fabless (i.e., it designs the devices, but outsources its manufacturing) semiconductor company specializing in analog, signal processing, and DSP1 devices. The company was founded in 1984 and many home video sound amplifiers use its audio processors. Cirrus Logic has also made modems, controllers, hard drives, CD drives, and sound and graphics cards. Cirrus stock will continue to grow thanks to a significant breakthrough in its audio technologies.
Cirrus Stock Executives Are Optimistic
Cirrus can expect significant growth in revenues this year and in 2017, the company expects especially strong growth thanks to some new products. Cirrus’ optimism is tied to the next generation of Apple Inc.’s (NASDAQ:AAPL) “iPhone,” the “iPhone 7,” which is rumored to be launched in September 2016. (Source: “iPhone 7 release date, rumours, news, specs, price and everything you need to know,” Digital Spy, January 4, 2016.)
The iPhone 7 is slated to feature at least two major technological innovations, which could make it the most anticipated release in the 2016 smartphone roster. One of these innovations is wireless charging. (Its rumored induction charging means that it will be sufficient to place it on a pedestal, without the need for a direct plugin.) The other, and this where owners of Cirrus stock will want to pay attention, is the disappearance of the headphone jack in favor of a lightning port.
The American magazine Fast Company has confirmed that the iPhone 7 should see the elimination of the 3.5 mm jack. (Source: “It’s True: Apple Will Drop Headphone Jack To Make The iPhone 7 Slimmer,” Fast Company, January 7, 2016.) Cirrus Logic is developing new earphones for the iPhone 7. In other words, users of the iPhone 7 will need a new headset or an adapter, which will allow old-school customers to continue using an otherwise non-compatible headset.
Wolfson Microeletronics plc, recently acquired by Cirrus Logic, will offer ambient noise reduction technology to improve sound quality when listening to music or using the phone for actual phone calls. The absence of a jack eliminates the last main obstacle to the production of a thinner chassis, while also allowing the phone to be completely waterproof.
The predicted demand for the iPhone 7, which promises to be the most revolutionary iPhone since the first generation came out in July of 2007, is significant. Cirrus could have done worse than to link a sizeable portion of sales to the fate of the new iPhone. Sales of the iPhone are an important indicator for the performance of Cirrus Logic’s stock. (Source: “Cirrus Logic (CRUS) Stock Plunges on Possible iPhone Output Cuts,” The Street, January 5, 2016.)
While analysts attributed rumors of an iPhone production cut at Apple as the reason for Cirrus stock plunging in the first trading days of 2016, this demand is linked to the current iPhone models. The iPhone 7 has the features that will allow the iPhone family to stand out from the competition, meaning the decline in CRUS stock should be temporary.
Simply put, Cirrus stock has a much less cloudy future in 2016 than the markets have shown so far. Analysts have also noted that Cirrus Logic has a strong financial position and is showing strong revenue growth—both good signs for the stock’s future.