Cirrus Logic, Inc.’s CRUS stock has gained 45.4% in the past six months outperforming its sub-industry, the Zacks Computer and Technology sector and the S&P 500 Composite’s growth of 29.4%, 16.1% and 15.7%, respectively. Cirrus Logic is a fabless semiconductor supplier, which develops low-power, high-precision mixed-signal processing solutions.

Six-Month Price Performance Chart

Image Source: Zacks Investment Research

Closing at $124.01 as of yesterday’s trading session, CRUS stock is currently trading 1.6% below its 52-week high of $147.46 attained on Aug. 29, 2024.

Such impressive short-term returns are likely to make investors wonder if it is the right time to buy or stay the course.

Can CRUS Stock Continue its Upward Trajectory?

Improving financial performance is buoying the stock trajectory. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 56.6%.

Cirrus Logic’s top-line performance is gaining from increasing demand for its product portfolio. Improving shipments into the smartphone market is a key tailwind. CRUS has also begun ramping up production of its custom boosted amplifier and first 22-nanometer smart codec ahead of upcoming smartphone launches in the latter half of the year. Expansion into new markets is an additional tailwind.

Image Source: Zacks Investment Research

CRUS remains focused on product innovation to capture the increasing revenue opportunities. Growing momentum in the laptop market and increasing win designs with its customers of next-generation flagship smartphones bode well.

In June 2024, CRUS launched its latest lineup of digital-to-analog converters and an ultra-high-performance audio CODEC. These innovative solutions are specifically crafted for recording artists, live performers and audiophiles, delivering uncompromising sound quality and exceptional performance. These devices offer top-notch performance, minimal power consumption and features like hybrid gain control to address the pressing audio challenges that have been rooted in the industry for a long time.

The company plans to make investments in the advanced battery and power technology market related to high-efficiency charging, battery management and system-side power delivery.

These new products should significantly improve the performance of the prior generations. Owing to these factors, the company expects High-Performance Mixed-Signal and Audio SAM to cross $5.7 billion and $3.3 billion, respectively, by 2028. These factors are likely to drive revenue performance and propel stock upward.

Strong Outlook Reinforces Confidence in CRUS Stock

For second-quarter fiscal 2025, management expects revenues between $490 million and $550 million. The Zacks Consensus Estimate is pegged at $520 million, up 8.1% year over year. The fiscal second quarter of 2025 begins and ends one week later compared with the prior-year quarter. As a result, it has one week of higher volume production associated with seasonal product ramps.

Combined R&D and SG&A is anticipated to be between $149 million and $155 million. The gross margin is expected to be in the range of 50-52%.

Nonetheless, increasing expenses particularly higher variable compensation expenses and product development costs are concerns. Stiff rivalry and volatile forex movement amid uncertain macroeconomic conditions are other headwinds.

CRUS’ Sound Liquidity & Buyback Plans

Cirrus Logic is a cash-rich company with a strong balance sheet. As of June 29, 2024, the company had cash and cash equivalents and marketable securities of $491.4 million with no long-term debt. Since CRUS has net cash available on its balance sheet, the existing cash can be used for pursuing strategic acquisitions, investment in growth initiatives and distribution to the company’s shareholders.

The company’s share repurchase activity is noteworthy. The company repurchased 361,218 shares worth $41 million in the last reported quarter. As of June 29, 2024, CRUS had $274.1 million worth of shares remaining under its existing share repurchase authorization. In fiscal 2024, it bought back shares worth $186 million.

CRUS Trades at a Discount

CRUS stock is trading at a discount with a forward 12-month price/earnings multiple of 18.45 compared with the industry’s multiple of 32.1.

Image Source: Zacks Investment Research

Subdued Estimate Revision Activity for CRUS

In the past 60 days, analysts have kept their earnings estimate for the current quarter unchanged but the estimate for the next quarter has been revised downward by 3.1%. The earnings estimate for the current year has also been revised downward by 2.7%.

Image Source: Zacks Investment Research

Is it a Good Time to Invest in CRUS Stock?

Though downward estimate revision activity is concerning, increasing business pipeline activities and attractive valuation present CRUS as a compelling investment opportunity. Consequently, investors should add this Zacks Rank #1 (Strong Buy) stock to their watchlist. Apart from a favorable rank, CRUS has a Growth Score of A. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or 2 (Buy) and a Growth Score of A or B offer solid investment opportunities.

Other Stocks to Consider

Some other top-ranked stocks worth consideration in the broader technology space are Workday WDAY, NetApp NTAP and BlackBerry BB. Each stock currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for WDAY’s 2024 EPS is pegged at $6.97, unchanged in the past seven days. Workday’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 9.1%. The stock has surged 12.2% in the past year.

The Zacks Consensus Estimate for NTAP’s fiscal 2025 earnings is pegged at $7.08 per share, unchanged in the past seven days. NTAP’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while matching in the remaining quarter, with the average surprise being 8.6%. Its shares have gained 63% in the past year.

The Zacks Consensus Estimate for BlackBerry’s fiscal 2025 EPS is pegged at a loss of 2 cents, improved from a loss of 5 cents in the past 30 days. BB’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 131.3%. Its shares have declined 32.5% in the past year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NetApp, Inc. (NTAP) : Free Stock Analysis Report

Cirrus Logic, Inc. (CRUS) : Free Stock Analysis Report

Workday, Inc. (WDAY) : Free Stock Analysis Report

BlackBerry Limited (BB) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research