(By Balaseshan) Oppenheimer & Co. analyst Rick Schafer raised his price target on shares of Cirrus Logic Inc. (NASDAQ:CRUS) to $30 from $28, while reiterating his "Outperform" rating.
After the company's fourth quarter results, the brokerage increased its 2013 EPS estimate to $1.64 from $1.59 and its 2014 estimate to $1.95 from $1.82.
The company posted in-line fourth quarter EPS of $0.36 and revenue of $111 million. Q4 sales split 82%/18% Audio/Energy, compared to 86%/14% the prior quarter. Energy increased 19% sequentially on an uptick in high GM Seismic and initial LED production ramp (about 500,000 units).
Despite an ongoing LED ramp, Schafer looks for Energy to decline sequential in Q1 as notoriously lumpy Seismic sales drop.
Audio was down 14% sequential as sales to Apple Inc. (NASDAQ:AAPL) decreased about 20% to 63% of total revenues from 70% in the prior quarter. Home audio sales rebounded 5% on inventory restocking. Despite the near-term lull, AAPL remains CRUS's primary growth driver and could exit calendar 2012 as an 80% customer.
Gross margin increased 250 basis points sequential to 56.5%, above prior guidance of 54% to 56%. Gross margin guidance of 54% reflects the expected down-tick in high-margin Seismic.
The analyst looks for margins to remain relatively stable in the mid-50's going forward as management counters the mix shift towards PA with better wafer pricing, improved BE cycle times and increased integration.
Management secured a $100 million revolver to fund a rapid inventory build to support second half demand. With $185 million in cash on hand, Schafer believes CRUS has ample room to take on the expected about $56 million inventory increase. Additionally, it has secured front and back-end capacity.
Outlook for Q1 revenue of $101 million fell short of consensus $107 million on timing issues at Apple. Management expects a sharply higher level of revenue beginning in Q2. Inventory is expected to double sequential as CRUS funds increased demand with a $100 million revolver.
The analyst believes CRUS has secured the iPhone 5 socket and look for units as well as content increases to drive second half upside. CRUS remains a top play on the growth and success of Apple. He looks for shares to trade better today following management's bullish second half commentary.
CRUS shares are up 46% versus SOX's 12% uptick. Despite yesterday's 11% rally and year-to-date outperformance, CRUS trades at 12 times calendar 2013 EPS, a discount to peers' 14 times.
The analyst attributes this to customer concentration fears. Near term, he feels CRUS offers investors some of the best growth/upside potential in the group on the back of AAPL unit/content growth.
CRUS closed Thursday's regular session up 18.62% at $27.39.