Simply put, Apple Inc. (NASDAQ:AAPL) has lost its wheels this year. The stock’s almost 24% down and something or the other is always present to compound its misery. With so many spotlights on it, every piece of news is magnified a hundred times and unfortunately, the positives have been hard to come by. It all started when the company disappointed the Street in January, and since then, there’s been no looking up.
In this post, we’ll take a look at two of them, and see why you should keep your eyes fixed on these reports.
What Cupertino gives, it takes back
Cirrus Logic, Inc. (NASDAQ:CRUS) is not flirting with the clouds anymore. The stock has lost 35% so far this year and was buried deep into the ground last week after releasing preliminary results. The preliminary report wasn’t too bad, as Cirrus Logic, Inc. (NASDAQ:CRUS) reported revenue of $206.9 million, which translates into a fantastic jump of 87% from last year.
However, the Street had set the bar higher at $210.2 million, and the company’s commentary about its margins and inventory reserve didn’t help either. A likely delay by Apple Inc. (NASDAQ:AAPL) in the production of its next gen devices is probably the reason why Cirrus Logic, Inc. (NASDAQ:CRUS) had to record an inventory reserve. Its gross margin should also be around 40%, way below Cirrus Logic, Inc. (NASDAQ:CRUS)’s erstwhile guidance of 50%-52%.
Cirrus Logic, Inc. (NASDAQ:CRUS) is the closest proxy of Apple Inc. (NASDAQ:AAPL), as the company derives around 90% of its revenue from the smartphone behemoth, and as such, a delay in production of iDevices seems to be hurting it big time. But, it seems like a temporary blip, as Cirrus Logic, Inc. (NASDAQ:CRUS) expects margins to return to normal levels in the ongoing quarter. The September quarter is usually the most prolific one for the Apple Inc. (NASDAQ:AAPL) supply chain and the company should put up a solid performance in the latter half of the year.
But the best thing about Cirrus at the moment is that it’s cheaper than ever. A trailing P/E of 7.6 times isn’t befitting of a company which has been growing its revenue and earnings at a massive pace over the past few quarters. Moreover, a debt-free balance sheet, a PEG ratio of just 0.28, and possibility of solid revenue growth towards the back end of the year seem compelling reasons why investors should consider buying Cirrus at levels that are close to its 52-week low.
Keep an eye on Cirrus on Apr. 25, when it’s scheduled to release its comprehensive report along with management commentary.
Double header
Cirrus isn’t the only Apple supplier to come up with earnings on April 25 as it will be accompanied by Skyworks Solutions Inc (NASDAQ:SWKS). The manufacturer of radio frequency (RF) solutions has been better off than Cirrus Logic, as it has appreciated around 1.5% so far this year. However, the going has been tough for Skyworks Solutions Inc (NASDAQ:SWKS) as well, as it’s susceptible to negative Apple news and QUALCOMM, Inc. (NASDAQ:QCOM)’s advances in the RF space.
However, as far as QUALCOMM, Inc. (NASDAQ:QCOM)’s threat is concerned, it doesn’t seem to be life threatening for Skyworks. Moreover, with the stock trading close to its 52-week low like Cirrus, there are a few reasons why investors might consider lapping some shares at this level. Firstly, Skyworks is no Cirrus since it has greater customer diversification. Foxconn accounted for 29% of its revenue last year followed by Samsung at 17%.
More importantly, Skyworks has witnessed an improvement in its Samsung account, and the Korean giant’s latest Galaxy flagship carries not one, but three Skyworks chips inside. Hence, punishing Skyworks on the basis of Apple’s woes is just not right. In addition, Skyworks advances in the Chinese cellular market, where consumers are now upgrading to smartphones at a rapid rate.
The company is poised to benefit from the growth of connected devices and not just smartphones and tablets. The company has a huge addressable market ahead of it and boasts of both Apple and Samsung as clients. The stock trades at a forward P/E of just 8 times, has a PEG ratio of 0.65, the balance sheet contains no debt and has $377.5 million of cash.
The takeaway
Cirrus is a pure Apple play, and its fortunes are surgically attached to Apple. However, with the stock trading at dirt-cheap levels, and Apple’s new devices expected to go into production soon, it might be worth the risk. If Apple expands its product line by including a wearable device or a cheaper iPhone, then Cirrus could be in for glorious times like it witnessed when the iPad mini was launched. Also, a retina sporting iPad mini would do wonders to the top line of both Apple and Cirrus.
As far as Skyworks is concerned, it’s a more diversified play than Cirrus. Although Skyworks doesn’t trade as cheaply as Cirrus on a trailing basis, the company’s diversified client base makes it worth the premium. Thus, with both these stocks trading close to their 52-week lows and reporting earnings this week along with Apple, their upcoming reports might throw out some catalysts which you won’t want to miss.
The article Keep a Close Eye on These Stocks This Week originally appeared on Fool.com and is written by Harsh Chauhan.
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