Shares of Cirrus Logic (CRUS +1.11%) jumped as much as 18.6% higher on Wednesday, cooling down to a robust 14.6% gain at the end of the day. The designer of audio control and voice-processing chips reported fantastic third-quarter results that exceeded analyst expectations by a country mile.
Q3 earnings crushed expectations
Your average Wall Street firm would have settled for earnings of roughly $2.01 per share with revenues near $540 million. Instead, Cirrus saw sales increase 5% year over year to $620 million. On the bottom line, adjusted earnings rose by 20% to $2.89 per diluted share.
Cirrus is expanding its market reach outside the smartphone market where the company has provided the audio processors in Apple (AAPL +1.08%) iPhones for years. Important product wins and initial shipments for Cirrus chips in Q3 included high-end laptops and tablets, with an eye toward virtual reality (VR) headsets and other wearable computing devices in the future. For example, Cirrus chips provide the audio experience in the recently released Apple Vision Pro VR headset.
NASDAQ: CRUS
Key Data Points
The never-ending quest for customers not named Apple
Though Cirrus is seeking new clients outside of Apple, the pride of Cupertino still accounts for an overwhelming majority of this company's orders. Apple stood for 89% of Cirrus' total sales in this report, up from 83% three years ago.
At the same time, Cirrus has diversified its product catalog to an impressive degree. In the long run, the company aims for a 50/50 balance between audio-chip sales and revenues from other mixed-signal processors. Examples include digital-camera controllers, fast-charging solutions, and tactile-feedback chips.
After Wednesday's big jump, Cirrus stock returns to prices not seen since last April. I'm interested in the company's diversification efforts, and the stock looks quite affordable today at 2.7 times trailing sales and 14 times earnings. Until the client hunt gains traction, you can consider Cirrus Logic's stock a more affordable proxy for buying Apple stock.
