Why Cypress Still Looks Like A Buy

When I last wrote about Cypress Semiconductor (Nasdaq: CY  ) in October, I told you why I thought the stock looked like a buy. Since then, the stock has made its investors wealthier by some 18%, though of course it's long-term performance that counts.  From that perspective, I still think Cypress looks like a buy.

What's really caught my eyes is the way it has been performing in an otherwise drab semiconductor market, one which saw a weak 2011.

Consider this: Last quarter, the company reported its highest quarterly revenue -- $265 million -- in over a decade. Earnings peaked the most since the turn of the millennium. Cypress reported earnings growth of 32% on a per share basis from 2010.

What was behind this fairytale story? Let's take a look.

Strategic partnership
The company's primary businesses are supplying imaging sensors and touchscreen controllers to mobile handset makers. Its TrueTouch touchscreen controller business grew rapidly last year and shot through the roof, rising 208% from 2010. Moreover, Cypress's partnership with NVIDIA (Nasdaq: NVDA  ) to develop touchscreen capabilities for Android-enabled devices is bearing fruit. NVIDIA recently certified that Cypress' controllers will be used in tablets running the latest Android Ice Cream Sandwich, and this will probably help Cypress to continue its top-line growth once the tablets hit the shelves.

And if we take a look at NVIDIA, the company has been pushing aggressively towards the mobile computing platform and has seen design wins at Samsung, LG, and Motorola for its Tegra processors, which are used in smartphones and tablets. So, if we intertwine NVIDIA's prospects with Cypress's partnership, it looks like a win-win situation for Cypress.

The Fire story
Cypress could see another meaty design win this year. After the success of the Kindle Fire, which sold a million devices every week in the holiday period last December, the company is ready to come up with a sequel to the 7-inch tablet. Amazon (Nasdaq: AMZN  ) is on its way to launch a new version of the Fire this year, and there's a possibility that Cypress will feature in the new device. So, this could again be a major top-line driver for Cypress going forward.

The Foolish takeaway
The signs for Cypress in the New Year are positive and we may see the company bring in the moolah once again this year. Add to all these a dividend yield of 2.1%, and Cypress looks a stock worthy of note.

To keep track of the company's progress this year, add it to your Watchlist by clicking here.

Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of NVIDIA, Amazon.com, and Cypress Semiconductor. Motley Fool newsletter services have recommended writing puts in NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1757489, ~/Articles/ArticleHandler.aspx, 12/21/2014 7:09:20 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement