Michael Bogan
Share of Cirrus Logic Inc (Nasdaq: CRUS) got a shot in the arm Tuesday following CNBC Mad Money host Jim Cramer said Monday that Cirrus is �the single-best derivative play� of Apple Inc. (Nasdaq: AAPL).
Apple’s success drives approximately one-third of Cirrus’ revenue growth, Cramer wrote on his Mad Money blog, providing strong, steady demand for Cirrus high-precision analog and mixed-signal integrated circuits. Usually considered a negative by analysts, one third of revenue derived from one customer is a positive in this case, as Apple affords Cirrus investors a relatively secure revenue stream from a string of successful Apple products.
With more than 1 million units sold since its April 3 launch in the U.S., the Apple’s 9.7-inch iPad tablet is expected to sell 5 million more by year end.
“We are also picking up that the iPad continues to do better than expected with surprising strong momentum of the iPad 3G,” said analyst Shaw Wu of Kaufman Brothers.
“(Cramer) highlighted the value of Cirrus and that it was undervalued as of (Monday’s) closing price,” said analyst Jeff Schreiner of Capstone Investments, adding Cramer’s comments pushed the stock higher.
Scheiner rates Cirrus shares a �strong buy,� noting he expects strong demand for the Apple’s iPhone and new product offerings such as iPad through fiscal 2011.
Moving away from conventional wisdom, Cirrus has embraced dependency on large customers, as 36% of company revenue comes from its top 10 largest customers, with one customer accounting for more than 15%� of total sales during the full 2009 fiscal year. By the close of the fourth quarter ended April 27, the company reported 33%� of total revenue for the quarter was derived from one customer, which teardown firm Chipworks analysis suggests comes from Apple.
“We believe the Apple relationship is likely favorable for Cirrus in obtaining additional tier-1 handset vendors,” Schreiner wrote in a note to clients.
Shares of the Austin, Texas-based company rose $1.80 to close at $13.78, up 15.03%, on 15.6 million shares Tuesday.
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