This Audio Chip Stock Has Multiple Growth Catalysts
Today’s stock is another “picks and shovels” play on the rising demand for semiconductors, as the market for connected devices continues to grow by leaps and bounds. Semiconductors have become ubiquitous as their demand rises in almost all areas of consumer technology.
The chip company in focus today stands to gain immensely from the innovations it is bringing to the voice technology space.
Cirrus Logic, Inc. (NASDAQ:CRUS) builds integrated circuits (ICs) for audio and voice signal processing applications. The company produces analog and mixed-signal ICs for a number of customers. The company’s portable audio products are used in digital headsets, smartphones, tablets, and wearable devices. Its non-portable audio and other products target smart home applications, as well as the automotive and industrial markets.
I am bullish on CRUS stock for the following reasons.
CRUS stock is likely to make impressive gains from the expected success of the upcoming “iPhone 8.” With Cirrus being a major supplier to Apple Inc. (NASDAQ:AAPL), Cirrus Logic stock will be boosted if the new iPhone brings in good numbers.
Moreover, as the demand for differentiated audio and voice experience continues to proliferate, Cirrus Logic has the ability to provide best-in-class components that give the company its competitive edge.
Since the arrival of the “Amazon Echo” by Amazon.com, Inc. (NASDAQ:AMZN), voice control has become a significant interface within homes. Today, companies like Alphabet Inc (NASDAQ:GOOG) and Apple have integrated voice control into their smart home systems. The smart home market is expected to reach almost $122.0 billion by 2022, growing at a compound annual growth rate (CAGR) of 14.07% between 2016 and 2022. (Source: “Smart Home Market by Product…Global Forecast to 2022,” MarketsandMarkets, last accessed June 13, 2017.)
Cirrus Logic has an advantage in the emerging area of voice applications with its current portfolio of audio products. The company can leverage its expertise in ultra-low-power ICs and “SoundClear” software for crystal-clear performance, thus enabling consumers to interact with their devices hands-free or carry on with phone conversations free from background noise.
Its voice technologies—like “Echo Cancelation,” “Noise Reduction with Multi-Mic Beamforming,” and “Far Field Voice Capture”—are likely to continue expanding market share and pushing CRUS stock higher.
Cirrus Logic recently posted impressive quarterly and annual results. For the fiscal-year 2017, the company’s revenue grew by 32% year-over-year, along with the expansion of operating profits and earnings per share (EPS). Annual revenue grew by meaningful content increases with existing customers and new product introductions. FY2017 was the third consecutive year of more than 25% revenue growth, and the company significantly broadened its product portfolio to target many emerging markets.
CRUS stock has gone up by more than 80% over the past year, and has more than doubled in the past five years.
Chart courtesy of StockCharts.com
The Bottom Line on CRUS Stock
Although the fortunes of Cirrus Logic stock have been tied up with the success of the iPhone 8, the company has started to focus on diversifying its base, which will be a big positive. With the company entering into new areas like voice biometrics, the growth prospects for CRUS stock are very high.
As consumers today shift toward a voice-connected world, where the user interface is driven by voice commands and voice control-enabled technologies, Cirrus Logic’s voice solutions will continue to be in greater demand. This will keep the picks-and-shovels CRUS stock moving higher.