Editors Note:

If Apple shares are too risky at their nosebleed highs, there are suppliers worth a look. Cirrus Logic is one of those suppliers but they also supply Samsung and other manufacturers as well.



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CRUS - Cirrus Logic - Company Profile

Cirrus Logic, Inc., a fabless semiconductor company, develops, manufactures, and markets analog and mixed-signal integrated circuits (ICs) for a range of consumer and industrial markets. It offers portable audio products, including analog and mixed-signal audio converters, and digital signal processing products for mobile applications; codecs-chips that integrate analog-to-digital converters and digital-to-analog converters into a single IC; smart codecs, a codec with digital signal processer; amplifiers; and micro-electromechanical systems microphones, as well as standalone digital signal processors. The company offers its products for mobile devices, including smartphones, tablets, digital headsets, wearables, smart accessories, and portable media players. Its products are also used in laptops, audio/video receivers, home theater systems, set-up boxes, portable speakers, digital camcorders, musical instruments, and professional audio products applications; and serve the automotive market, which include satellite radio systems, telematics, and multi-speaker car-audio systems. In addition, the company's products are used in industrial and energy-related applications, including digital utility meters, power supplies, energy control, energy measurement, and energy exploration applications. It markets and sells its products through direct sales force, external sales representatives, and distributors in the United States and internationally. Company description from FinViz.com.

Cirrus is a major component contributor to Apple, Samsung and other smartphone manufacturers. They also supply chips to dozens of other types of products.

In 2014 Apple provided for 80% of Cirrus annual revenue. In 2016 that declined to 65% and continues to shrink. Samsung made up 15% of 2016 revenue.

The strong sales of the iPhone 7 and the expected blowout sales for the iPhone 8 and Samsung 8 this year should produce millions in additional revenue. Sales rose 28% in 2016 and analysts expect 31% revenue growth in 2017. Earnings are expected to rise 82% for 2017

With the iPhone 8 expected to post blowout sales numbers, that means component demand over the next 9 months will also be strong. Suppliers normally begin shipping components in the last week of June but this year there are indications they have been requested a month earlier so that Apple can have more phones on hand when sales begin.

Earnings May 3rd.

With earnings in early May, this will only be a three-week position. We will exit before earnings. On the chart, the spike on February 1st was earnings of $1.87 compared to estimates for $1.63. The immediate decline the next day was on guidance for revenue of $300-$340 million and analysts had been expecting $331.9 million. That dip has been forgotten given all the hype over the iPhone 8 and Samsung 8. A move over that level should trigger additional short covering.

Buy May $65 call, currently $3.00, initial stop loss $58.85.


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