Cypress Semiconductor (NASDAQ:CY) will look to turn things around and give investors some much-needed relief when it releases its fiscal fourth-quarter results on Thursday, Jan. 31. Shares of the chipmaker took a drastic haircut in 2018 thanks to a slowdown in the broader semiconductor market and negative analyst sentiment.

However, the market seems to be discounting the fact that Cypress' top and bottom lines have been growing at an impressive pace over the past few quarters.

CY Chart

CY data by YCharts.

The company's strategy of going after fast-growing niches within the semiconductor industry has paid off nicely so far, as evident from the charts above. But can it sustain its momentum given the prevailing weakness in the semiconductor industry? Let's find out.

Question marks are drawn on the wall behind a man.

Image Source: Getty Images.

The headline numbers

Cypress expects to deliver fourth-quarter revenue of $600 million at the midpoint of its guidance range, while adjusted earnings should fall between $0.31 and $0.35 a share. This means that its top line will remain flat on an annual basis, while EPS is expected to jump from $0.28 in the prior-year period.

The company was cautious with the guidance numbers three months ago because of end-market "uncertainties and slower ordering patterns," but there's a possibility that it could have been looking to underpromise and overdeliver. The company has a history of easily surpassing Wall Street's estimates in each of the past four quarters.

What's more, management claimed during its third-quarter earnings conference call that the company had seen accelerated design-win activity. That improves the probability of Cypress delivering stronger-than-expected results.

The big picture

The chipmaker has been able to beat the end-market slowdown so far thanks to the Cypress 3.0 strategy, which entails going after semiconductor verticals that are outpacing the growth of the broader industry. That's the reason the company witnessed such a massive increase in design wins during the third quarter, paving the way for long-term growth when these wins start paying off.

But that doesn't mean Cypress is immune to the near-term challenges faced by the semiconductor industry. The company's Asia-Pacific customers are replenishing inventory at slower rates, though it should be noted that they aren't canceling orders. CFO Thad Trent has also indicated that some of its customers outside China are also being conservative while placing orders.

So there's a possibility of Cypress issuing muted guidance along with its fourth-quarter results. But investors shouldn't miss the big picture as the company could win big from emerging tech trends like connected cars and the Internet of Things.

Cypress has trained its product development efforts toward these markets because of the lucrative growth they offer. For instance, the company is regularly adding new automotive connectivity chips to its portfolio as demand for connected cars is projected to increase at a compound annual growth rate of 18%.

The chipmaker has already made a dent in this market. Its Wi-Fi and Bluetooth combo connectivity chips are used by the top eight automotive original-equipment manufacturers to develop a variety of solutions from telematics to infotainment.

Similarly, CEO Hassane El-Khoury said in an interview with financial news website TheStreet.com that the company is growing at a faster pace than the average market growth in the smart-home space. That's because it has been able to supply chips for popular smart-home hardware such as Amazon's smart speakers, Nest thermostats, and smart-lighting solutions from the likes of LEDVANCE.

So Cypress is making the right moves to secure its long-term growth, which is why investors shouldn't be fazed by any potential short-term weakness after the quarterly results are out. Instead, they can consider buying more of the stock thanks to an attractive valuation and healthy cash profits, as well as the fact that the company's target markets will improve for a long time since they are at the beginning of their growth curve.

Check out the latest Cypress Semiconductor earnings call transcript.