Cirrus Logic HOLD

CRUS : NASDAQ : US$18.74
Target: US$18.00

Cirrus Logic, a fabless semiconductor company, develops
and sells high-precision analog and mixed-signal
integrated circuits (ICs) for audio and energy markets
worldwide. The company offers analog and mixed-signal
audio converter, digital amplifiers and audio digital signal
processor (DSP) products. The company also provides
high-precision analog and mixed-signal ICs and boardlevel
modules for energy-related applications.

Technology — Hardware — Semiconductor Devices and Related
Investment recommendation
We expect CRUS to continue to trade at a discount to peers following
disappointing guidance. Revenue concentration remains a negative for
the company, especially given a flattening out of dollar content and
uncertain unit growth going forward. Our estimates are reduced and our
price target is lowered to $18.
Investment highlights
CRUS reported CQ4/13A (Dec) after the close. Revenues and EPS
were $218.9 million and $0.89, compared to consensus estimates of
$213.3M/$0.77 and our estimates of $210M/$0.74. Gross margin
for the quarter was 47.6%, above guidance of 45% to 47% benefiting
from a favorable product mix. EPS benefited from higher revenues
and better than expected gross margins.
Revenue for the March quarter is expected to range from $130
million to $150 million compared to our estimate of $187 million
and the consensus estimate of $174 million. Implied EPS at the midpoint
is $0.30, compared to a consensus estimate of $0.48 and our
estimate of $0.52. Management highlighted the weak revenue
guidance is driven by a seasonal sequential decline in portable
audio and Y/Y decline in ASPs.
Cirrus Logic’s price target of $18.00 (was $24) is 7x our C2014 EPS
estimate of $1.76 plus net cash of $5.01/share.


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