Cirrus Logic, Inc.

CRUS Details

Cirrus Logic, Inc. (NASDAQ: CRUS) provides low-power, high-precision mixed-signal processing solutions and the associated software for world’s top mobile and consumer applications. It is a leading provider of audio and high-performance mixed-signal processing solution provider.

Q1FY22 Results Performance (For the First Quarter Ended 26 June 2021)

• Accelerated Sales Momentum: The company has experienced an acceleration in sales momentum during the quarter as revenue increased by 14% YoY to $277.25 million.
• Gross Margin: It reported a GAAP gross margin of 50.5% in Q1FY22, while the non-GAAP gross margin stood at 50.6% in Q1FY22.
• Reduced Net Income: The company posted a decline in its net income to $17.21 million in Q1FY22 from $18.21 million in Q1FY21.

Key Data (Source: Company Reports)

Entered Into an Agreement to Acquire Lion Semiconductor

• On 8 July 2021, the company stated that it has agreed to acquire California-based Lion Semiconductor for $335 million in cash. This acquisition will assist the company in providing further acceleration to its strategy of applying its mixed-signal expertise to new markets and expands its High-Performance Mixed-Signal Technologies portfolio

Outlook

Guidance: The company plans to achieve revenue in the range of $430-$470 million in Q2FY22 with the GAAP gross margin estimated to stay between 50%-52%. Further, it has forecasted that its combined GAAP R&D and SG&A expenses to remain between $135-$141 million taking into consideration around $17 million in stock-based compensation expense and $3 million in amortization of acquired intangibles.

Accelerated Revenue Growth Expected in FY22: The company remains buoyant and continues to anticipate enhanced revenue growth in FY22 driven by its strong pipeline of audio and high-performance mixed-signal products ramping in the next few months. Besides, the company highlighted that the long-term Capacity Reservation and Wafer Supply Commitment with GlobalFoundries will expand its ability to cater to the unprecedented market demand and meet customers’ supply commitment.

Key Risks

The company relies on certain customers and distributors for a substantial portion of its sales. Any loss of customers or a substantial reduction in orders or pricing on products sold could significantly hurt its sales and profitability. Further, fluctuation in sales in the consumer electronics and smartphone markets could adversely affect its business.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation (Illustrative)

Technical Analysis

Daily Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

CRUS has delivered 3-month and 6-month returns of ~+11.21% and ~-8.15%, respectively. The stock is trading near the average of the 52-week high price of $103.25 and the 52-week low price of $55.84.

We have valued the stock using a Price/EPS multiple-based illustrative relative valuation and have arrived at a target price that reflects a rise of low double-digit (in % terms). A slight premium has been applied to Price/EPS Multiple (NTM) (Peer Average) considering its upbeat guidance on revenue growth in FY22 and its growth strategies.

Considering the aforementioned factors along with its expanding market reach, healthy liquidity position, and growth outlook, we give a “Buy” recommendation on the stock at the current market price of US$80.38, up by 0.83% on 11^th August 2021. 

Citrix Systems Inc. 

CTXS Details

Citrix Systems Inc. (NASDAQ: CTXS) is engaged in providing virtualization, networking, and cloud computing solutions to organizations across the globe. 

Q2FY21 Update (Ended 30 June 2021)

Total Revenue Up 2% YoY: The company’s total revenue for the second quarter of FY21 stood at $812 million, an increase of 2% YoY, due to the $71 million year-over-year decline in Product & License revenue as a result of discontinuing the Workspace perpetual license offering. Subscription revenue stood at $374 million, an increase of 54% YoY. SaaS revenue grew 60% YoY to $210 million and accounted for 56% of subscription revenue and 26% of total revenue in the second quarter.

Key Data (Source: Company Reports)

Outlook:

The company’s three primary goals of its transformation includes:

• Build the most complete and integrated cloud-based Workspace platform to support customers deploying secure, distributed work;
• Transition new business bookings from on-premises licenses to SaaS subscriptions; and
• Migrate the installed base to Citrix Cloud services, making it easier for the customers to adopt additional Workspace technologies - creating additional customer value while, at the same time, modernizing the IT infrastructure.

Key Risks:

The company faces significant competition and this could result in the customer loss, fewer customer orders as well as reduced revenues and margins.

Valuation Methodology: Price/EPS Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation:

The company’s Board of Directors declared the quarterly dividend of $0.37 per share. This dividend would be paid on 24^th September 2021 to the shareholders of record on 10^th September 2021.

We have valued the stock using Price/EPS multiple-based illustrative relative valuation and have arrived at a target price that reflects a rise of low double-digit (in % terms). We have assigned a premium to Price/EPS Multiple (NTM) (Peer Average) considering increase in total ARR as well as decent outlook.

Considering the aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of $102.26 per share, up by 1.38% on August 11, 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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