On Tuesday, CFRA adjusted its outlook on NASDAQ:CRUS, reducing the 12-month price target for Cirrus Logic (NASDAQ:CRUS) to $109 from the previous $150, while keeping a Hold rating on the stock. The firm's analyst cited a revised price-to-earnings ratio of 16 times the anticipated CY 25 earnings per share (EPS) of $6.83 as the basis for the adjustment. This new target is lower than that of Cirrus Logic's peers, yet it is still higher than the company's historical average.
The firm also revised its earnings projections for Cirrus Logic, decreasing the FY 25 (March-ending) EPS estimate to $6.47 from $7.17 and the FY 26 EPS forecast to $6.93 from $7.63. These changes come despite Cirrus Logic reporting a September-quarter EPS of $2.25, surpassing the consensus estimate of $2.02 and the previous year's $1.80. Revenue for the company increased by 13%, which was in line with expectations, driven by a 12% rise in audio demand and a 14% increase in high-performance mixed-signal content.
However, the guidance for September-quarter revenue presented by Cirrus Logic, at a midpoint of $510 million, fell short of CFRA's estimate of $583 million. This guidance suggests an 18% year-over-year decline, attributed in part to one less week in the quarter and challenging comparisons to Android sales from the prior year.
Despite the lower revenue guidance, CFRA expressed optimism about Cirrus Logic's advancements, including the company's camera controller technology within Apple (NASDAQ:AAPL) products, the shipping of its next-generation custom boosted amplifier, and the introduction of its first 22-nanometer smart codec. The firm also sees potential in Cirrus Logic's laptop business.
The analysis acknowledged Cirrus Logic's strong net cash position of $707 million, which equates to over $12 per share, as supportive of the company's valuation. Yet, the firm also noted the high concentration of sales from Apple, which now accounts for 90% of Cirrus Logic's sales, as a potential risk factor.
In other recent news, Cirrus Logic has been making significant strides in its financial performance and strategic market positioning. The semiconductor company reported a record Q2 revenue of $541.9 million for fiscal year 2025, a 45% sequential rise and a 13% growth compared to the same period last year, primarily driven by robust smartphone demand.
However, the company's Q3 FY 2025 revenue outlook was adjusted to 12.4% lower than Stifel's estimate due to factors such as an extra week in FY 2024 and unusually high Android production in Q3 FY 2024.
Despite the lowered revenue outlook, Stifel maintained a Buy rating on Cirrus Logic's shares while revising the price target to $140 from $165. The firm expressed confidence in the semiconductor company's market position and its growth opportunities in diverse product categories such as laptops, tablets, AR/VR, and wearables.
Cirrus Logic has also entered the laptop market and launched new products including a next-generation custom boosted amplifier and a 22-nanometer smart codec. These recent developments are expected to contribute to future revenue streams.
Looking ahead, Cirrus Logic is forecasting significant growth in FY '26, with revenue from PC-focused products expected to be in the low tens of millions.
InvestingPro Insights
To complement CFRA's analysis, recent data from InvestingPro offers additional perspective on Cirrus Logic's financial position and market performance. The company's P/E ratio stands at 18.35, with an adjusted forward P/E of 16.68, aligning closely with CFRA's valuation model. This relatively low P/E ratio, especially when compared to the company's near-term earnings growth potential, suggests that the stock might be undervalued.
InvestingPro Tips highlight that Cirrus Logic holds more cash than debt on its balance sheet, reinforcing CFRA's observation about the company's strong net cash position. This financial stability is further supported by the fact that liquid assets exceed short-term obligations, indicating a healthy liquidity position.
Despite the recent guidance-induced setback, Cirrus Logic has shown impressive market performance, with a 56.79% price total return over the past year and a 25.03% return over the last six months. This strong performance, coupled with analysts predicting profitability for the current year, paints a more optimistic picture than the recent price target reduction might suggest.
For investors seeking a deeper understanding of Cirrus Logic's potential, InvestingPro offers 13 additional tips, providing a comprehensive view of the company's financial health and market position.
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