Cirrus Logic (CRUS -1.81%) stock offers one of the best ways for investors to take advantage of the booming sales of 5G smartphones thanks to its supplier relationship with major smartphone OEMs (original equipment manufacturers) like Apple (AAPL -2.15%). Surprisingly, the stock has failed to excite investors so far in 2021. A tech stock sell-off earlier this year and a weaker-than-expected quarterly performance in April have weighed on Cirrus shares.

But the chipmaker's recent earnings results suggest that the company's struggles may have come to an end, and its stock may be on the verge of breaking out. Let's discuss why.

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Cirrus Logic has regained its mojo

Cirrus had to face investors' fury in April after the company's revenue and earnings declined year over year. Guidance was also light thanks to production constraints that kept Cirrus from producing enough chips to meet demand.

But Cirrus' Q1 fiscal 2022 results (released July 29) indicate that its days of struggle may be over. Its revenue increased nearly 14% year over year to $277 million in Q1, which was at the higher end of its $240 million-to-$280 million guidance range. And Cirrus delivered $0.54 per share in adjusted earnings during the quarter, an increase of one cent from the year-ago period.

Man pointing finger upward at a red line rising up.

Image source: Getty Images.

Cirrus' improved sales performance was driven by a mix of higher Android smartphone sales, content gains in smartphones, and higher laptop sales during the quarter. And Cirrus expects its impressive sales momentum to continue. CEO John Forsyth pointed this out on the latest earnings conference call:

We increased penetration of our Android customers, ramped shipments for the leading laptop OEM, supported the adoption of new content in anticipation of product launches in the latter half of the year and advanced the development of a number of exciting new devices that are expected to fuel future revenue growth.

Cirrus' optimism is reflected in the company's guidance. It expects $450 million in revenue this quarter at the midpoint of its guidance range, which would be a 30% increase over the prior-year period. Investors should note that the revenue guidance includes the contribution from Lion Semiconductor, which Cirrus recently acquired for $335 million.

Cirrus estimates that the Lion acquisition would add $60 million to its revenue this fiscal year, which means that most of the chipmaker's top-line jump this quarter is going to be organic. The chipmaker says the same in its shareholder letter, pointing out that the "anticipated increase in revenue from the prior periods reflects higher unit volumes in smartphones and content gains in certain smartphones that are expected to launch later this year."

More importantly, Cirrus expects its strong sales momentum to continue for the rest of the fiscal year on the back of "strong customer engagements and content gains in new products coming to market later in FY22."

Better times lie ahead

Cirrus has dropped enough hints to tell us that it is on track to deliver an improved performance in the second half of 2021 and beyond. First, the company's impressive guidance isn't surprising, as 72%  of its revenue came from supplying chips to its largest customer, Apple, last quarter.

Apple is now preparing to launch its 2021 iPhone lineup. Cirrus management has seemed to indicate that the chipmaker may be supplying more chip content to Apple's new iPhones. That would be a great development for Cirrus, as Apple is reportedly looking to increase the initial production of this year's iPhone models by 20% compared to the iPhone 12. As a result, Cirrus could enjoy a mix of higher sales volumes and improved revenue from each iPhone that's launched this year.

More importantly, Apple's iPhone sales are expected to blow up in the 5G era thanks to the large portion of the company's massive installed user base that's currently in an upgrade window. Cirrus gives investors a way to buy into Apple's potential growth, as the chipmaker's sales blew up after the launch of the iPhone 12 -- a trend that's likely to continue with the next generation.

It is also worth noting that Cirrus is casting a wider net on the 5G smartphone market by tapping Alphabet's (GOOG 0.71%) (GOOGL 0.69%) Android OEMs. The chipmaker has ramped up volume shipments of audio chips to flagship and mid-range Android devices. It expects to win more business in Android smartphones on the back of positive customer engagements.

Cirrus is also taking smart steps to diversify its business by attacking the market for high-performance mixed-signal chips. The company's revenue from high-performance mixed-signal chips came in at nearly $59.9 million last quarter, a year-over-year increase of 66%. The segment accounted for 22% of Cirrus' revenue last quarter, up from 15% in the prior-year period. The audio business produced the rest of its revenue.

Cirrus is also seeing strong customer interest in its high-performance mixed-signal offerings, such as haptic drivers and sensing solutions. It expects to see some of its design wins come into the market over the next year. More importantly, Cirrus sees the addressable market of its mixed-signal business jumping from an estimated $435 million last year to $3.5 billion by 2025. The audio business that accounts for most of Cirrus' revenue now is expected to present a relatively smaller revenue opportunity worth $3 billion in 2025, up from $2.3 billion last year.

Cirrus' newly found momentum could last for a long time to come. Therefore, investors looking to add a growth stock to their portfolios might want to consider buying this chipmaker right away, as it trades at just 22 times trailing earnings and 15.7 times forward earnings -- which is a nice discount to the S&P 500's earnings multiple of 33.7.