Monday, November 22, 2010

Cirrus Logic a Buy or Sell?

I have recently purchase Cirrus Logic Share at $13.70. I think it is a good buy and it was confirmed today when the stock surge more than 10%.

So why did I buy Cirrus Logic ("CRUS")

Technical Analysis

Based on the technical analysis, the uptrend line has been broken. However, I believe the current downtrend lines will be broken as well. I believe the huge consolidation for CRUS is over and the stock is pose to gain higher and break the downtrend line.

The first resistant however is at the $16 level. The second resistance is at $20.50 level.

According to the 3 technical indicators that I have always rely on, the stochastic shown that the blue line has crossed over the red line and it is getting stronger, the MACD shows the same indication. It is very pretty line as per said by my wife beside me.

Fundamental Analysis
For the last 4 quarter, CRUS has been showing strong earning record as per below:
1) 2010-Quarter 3 = $0.19
2) 2010-Quarter 4 = $0.16
3) 2011-Quarter 1 = $0.29
4) 2011-Quarter 2 = $0.40

There are also many analyst including the Motley Fool website recommending a buy on CRUS.

This is a stock that I believe will at least help me to increase my capital for 30% or more and this is a stock that after I bought, I can sleep well and soundly at night.

Eventhough on my previous analysis I believe that DJIA will go through a hugh consolidation, however, I believe there will be some stocks which will go against the tide and continue to perform. 1 of them will be CRUS.

There is one good analysis that I would like to share from you all here, it is from Jefferies as per below:-

Jefferies Upgrades Cirrus Logic (CRUS) to Buy, Price Target $20

Cirrus Not Only Secure at Apple but with Increasing ASPs - Jefferies

Jefferies is upgrading Cirrus Logic (NASDAQ:CRUS) to Buy from Hold with a $20 price target (prev. $14) saying they believe is well positioned to maintain its share at its largest customer with increasing ASPs driven by higher integration and also has incremental opportunities with emerging products such as audio codecs in non-Apple smartphones, smart meters, LED lighting, and PFC.

Cirrus not only designed into next round of Apple products but with higher ASPs. Firm's checks give them increased confidence that Cirrus has secured wins at Apple (AAPL, Buy) in the upcoming CDMA iPhone, iPad 2, iPhone 5 and iPod Touch (5th gen). More importantly, Jeffco believes Cirrus continues to integrate additional external components and features that allows for increasing ASPs while still bringing down Apple's Bill-of-Materials (BOM). This is the same formula that allowed Cirrus to win its first Apple socket vs. Wolfson (WLF.LN, Buy) as they integrated ~$0.50 worth of discrete components which provided a huge pricing advantage. Their checks suggest Cirrus saw an increase in the ASP of the chip used in the iPods in September to ~$0.95 (from ~$0.75) due to the integration of additional discrete components (saves BOM cost) as well as additional features. Their checks suggest Cirrus will see a similar increase in ASP ($1.45 from $1.25) with the iPad 2 in CQ1:11 and iPhone 5 in CQ2:11.

The roadmap continues - Larger ASPs and larger barriers to competition. Jeffco says their checks suggest Cirrus is not done after this last round of ASP increases, in fact, they believe the next round could provide an even larger step up. Their checks suggest Cirrus potentially could integrate or bundle its audio DSP and/or Class-D amp capabilities with its audio chip for Apple's 2012 devices, which could increase the ASP by another $0.50 or more. It is obviously too early to call any design wins here, but they believe Cirrus continues to distance itself from the competition and will be hard to displace if it continues to deliver to its roadmap.

Raising estimates. Jeffco is raising their estimates to reflect higher ASPs as well as their higher CQ1 expectations. Firm is raising their CQ1 estimate to $86MM (from $81MM) as they now have greater clarity into the ramps of the CDMA iPhone and iPad 2, which help offset normal seasonality in non-portable audio and iPods. They raised their CY11 revenue to $398MM (from $366MM) and CY11 EPS to $1.41 (from $1.19) to reflect higher ASPs in the iPad 2 and iPhone 5.

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