Pacific Crest Upgrades Cirrus Logic (CRUS) to Overweight on Noise-Canceling Earbuds Opportunity in iPhone 7

Pacific Crest upgraded Cirrus Logic (NASDAQ: CRUS) from Sector Weight to Overweight with a price target of $40. Analyst John Vinh highlighted the recent pullback in the stock, reset expectations, and takeaways from CES related to confidence in the noise-canceling earbud opportunity in the iPhone 7.

"Given takeaways from CES and a pullback in the stock, we view this as a buying opportunity and upgrade CRUS to Overweight with a $40 target. We are upgrading CRUS to Overweight given (1) meetings at CES with headphone OEMs increase our confidence in the earbud opportunity in the iPhone 7; (2) we view the reset in expectations and recent pullback in the stock as a buying opportunity; and (3) despite lowering our F2016 estimates, we see an incremental $2 in content opportunity for Cirrus and are increasing our F2017 estimates. Our $40 price target is based on 12x our F2017 EPS estimate of $3.38," said Vinh.

The analyst added, "Discussions with multiple headphone OEMs increase our confidence in the noise-canceling earbud opportunity in the iPhone 7. Meetings with headphone OEMs increase our confidence in the noise-canceling earbud opportunity in the iPhone 7, as (1) we noted several headphones on display with Lighting connector interfaces, and (2) OEMs indicated superior sound quality from the use of a digital connector and the ability to embed a smart codec in the headphone. In our view, Apple needs a compelling feature upgrade, which noise-canceling earbuds would provide."

For an analyst ratings summary and ratings history on Cirrus Logic click here. For more ratings news on Cirrus Logic click here.

Shares of Cirrus Logic closed at $26.80 yesterday.

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