This Sector is Definitely in the Playoff

Written by GSCR Staff   
Wednesday, 12 November 2014 08:05

With another big shake-up week in college football there was some big movement in the inaugural college football playoff rankings yesterday.

 

We tied this week’s Goldman Guide into this theme with our four ‘big winner’ sectors for the end of the year; consumer discretionary, technology, energy, and defense. The question is where to go in each of these sectors.

 

We will look into the technology sector today, because as we mentioned, with financial reporting and quiet periods behind them, management teams of tech companies will be engaged in year-end roadshows with institutional investors to pump up their stocks. A year ago on Halloween we featured Cypress Semiconductor Corporation (NASDAQ – CY $10.15), as company we pulled right from the Apple, Inc. (NASDAQ – AAPL) preferred supplier list with a target price of $11.50. We barely missed the mark on the price target but the stock climbed steadily to over $11 this past June and is currently up 10% from our initial article. The stock got hammered in the late summer and early fall market chaos losing nearly 25% of its value. However, CY has made a remarkable 22% recovery since mid October. The momentum seems to be back as the Company has had some new product releases.

 

Here is a refresher on the Company. Cypress Semiconductor Corporation is a unique Silicon Valley supplier of everything from computers, hardware, to games.The Company’s products include the flagship PSoC 1, PSoC 3, PSoC 4 and PSoC 5LP programmable system-on-chip families. Cypress is the world leader in capacitive user interface solutions including CapSense touch sensing, TrueTouch® touchscreens, and trackpad solutions for notebook PCs and peripherals. Cypress is also a top provider in USB controllers, which enhance connectivity and performance in a wide range of consumer and industrial products. The Company is also the world leader in SRAM and nonvolatile RAM memories. The Company sells in major markets, including consumer, mobile handsets, computation, and data communications, automotive, industrial and military.

 

Yesterday Cypress introduced two single-chip Bluetooth® Low Energy solutions targeted at simplifying design of low-power, sensor-based systems . The new PSoC® 4 BLE Programmable System-on-Chip delivers unprecedented ease-of-use and integration in a customizable solution for IoT applications, home automation, healthcare equipment, sports and fitness monitors, and other wearable smart devices. The PRoC™ BLE Programmable Radio-on-Chip provides a cost-effective turnkey solution for wireless Human Interface Devices (HIDs), remote controls and applications requiring pure play wireless connectivity. Earlier this month , one of the Company’s joint projects was completed as the successful interoperability testing between both Cypress's EZ-USB FX3™ USB 3.0 peripheral controller and EZ-USB CX3™ camera controller with Icron Technologies Corporation’s USB 3.0 Spectra™ 3001-15 active copper extension cable was demonstrated at the VISION technology trade show in Stuttgart, Germany. All these product releases demonstrate Cypress is at the forefront of the industry.

 

So what are the compelling reasons to jump back in or add on to CY? First off the analysts’ estimates are for 6% revenue growth from 2014 to 2015 has the forward P/E of 16 versus the trailing of 1014! CY also just crossed to 200-day EMA on the technical side. A gross margin of 52% versus the industry average of 38% indicates the Company has products that are in demand with customers willing to pay.

 

Breaking through the 52-week high of $11.30 could trigger another large swing to the upside for CY. Roadshow momentum and a general uptick in the economy should trigger this over the next few months, then who knows where the stock could go.

 

Have a great day!

 

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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