On Thursday, Cypress Semiconductor (CY +0.00%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.
The mobile revolution has brought many small companies into the limelight, and Cypress Semiconductor has seen its share of attention thanks to its memory and mobile-device chips. But the company has seen its growth give way to falling revenue and weaker earnings more recently. Let's take an early look at what's been happening with Cypress Semiconductor over the past quarter and what we're likely to see in its report.
Stats on Cypress Semiconductor
|
Analyst EPS Estimate |
$0.01 |
|
Change From Year-Ago EPS |
(92%) |
|
Revenue Estimate |
$167.34 million |
|
Change From Year-Ago Revenue |
(9.6%) |
|
Earnings Beats in Past 4 Quarters |
2 |
Source: Yahoo! Finance.
Can Cypress Semiconductor get its mojo back this quarter?
Analysts have cut their views on Cypress Semi's earnings in recent months, having cut their full-year 2013 estimates by $0.10 per share and lowered their call for the just-finished quarter from $0.05 per share three months ago to just $0.01 today. The stock, though, has reflected a lot more optimism, with shares rising nearly 15% since early January.
Last year, Cypress suffered from an overall trend in the chip industry, with rivals Atmel (NASDAQ: ATML) and Synaptics (SYNA 5.97%) also experiencing weak share performance early in 2012. Along with Texas Instruments (TXN 1.59%), the companies all have a share in touchscreen controller components on major platforms. TI and Cypress split up the various Apple device markets, with Cypress handling iPod Nanos and MacBooks. Atmel is a leader with Android devices, while Synaptics has a place in the Nook and other devices.
But the specific challenge Cypress faces is profitability, as it makes much less money than its rivals. Atmel managed to pick up a spot in the Kindle Fire HD, while TI found its way into the iPhone 5, leaving Cypress out of some of the most popular new devices in the mobile market. Meanwhile, Cypress got into Microsoft's Surface, which has been a major disappointment with tepid sales thus far.
In fact, Cypress' big claim to fame in the space is its dividend, which now approaches 4%. Yet with weak earnings, it's unclear how long the company can keep supporting that payout unless it can restore its growth.
In its earnings report, Cypress Semiconductor needs to find new ways to use its system-on-a-chip technology to go beyond its microcontroller focus. With much of the business Cypress does turning into a commoditized industry, the company would benefit from innovation that will enable it to make unique state-of-the-art products that have no viable substitute. Without seeing signs of higher R&D spending, investors should be dubious about Cypress's future.
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