Why Cirrus Logic Stock Jumped Today
At the end of the second quarter, Cirrus Logic's management was somewhat unsure what to expect for Q3. It gave Q3 revenue guidance of $480 million to $540 million -- that's a big $60 million gap. But the company did far better than ever the high end of this outlook, with Q3 revenue ultimately coming in at $556 million. Granted, that was down 10% year over year, but it was far better than expected.
Cirrus' largest customer by far is Apple -- its components are used in the company's devices. And Cirrus' management said that its revenue was so good thanks to "strong demand for our smartphone audio components." This demand helped to lift the company's margins, with its Q3 gross margin of 53.6% meaningfully ahead of its gross margin of 51.3% in the prior-year period.
Cirrus' earnings per share (EPS) of $2.11 were down from EPS of $2.50. But its Q3 EPS was still ahead of analysts' expectations, which is why the stock is up today.
Cirrus' management still has a degree of uncertainty with demand for its products -- revenue guidance for the upcoming fiscal fourth quarter is $350 million to $410 million, which again is a wide range. That said, revenue for the fiscal fourth quarter of 2024 was $372 million. So it's possible that Cirrus gets back to growth in Q4, which investors are pleased to see.
One particularly good development in Q3 was that Cirrus Logic's products are getting into more devices, such as laptops. Diversifying its business into more use cases could help this business grow, and management is optimistic about its roadmap. Therefore, Cirrus Logic stock seems like one to watch in 2025.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends Cirrus Logic. The Motley Fool has a disclosure policy.
Why Cirrus Logic Stock Jumped Today was originally published by The Motley Fool
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