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Cypress beat Q1 earnings estimates, turns bullish

cypress semiconductor corporationSilicon chip manufacturer Cypress Semiconductor Corporation (CY) announced fiscal 2016 first-quarter earnings of $0.07 per share, which beat analysts’ estimates by a cent.

Following the company’s merger with Spansion, Inc. last year, the y-o- y revenue has more than doubled. As explained below, the growth prospects call for a long position in the counter. The share price of Cypress closed at $9.23 on Tuesday.

The adjusted revenue for the first-quarter of fiscal 2016 was $425.2 million, compared to $209.1 million in the prior year corresponding period. The revenue estimate of analysts was $436 million for the first-quarter.

However, the company achieved its first quarter revenue guidance in the range of $410 million to $440 million.


Segment wise, the programmable systems division registered a 4% sequential increase in revenue to $164 million in the first-quarter of fiscal 2016. The first-quarter revenue of memory products division reported a 17% sequential decline to $215.1 million. On the other hand, the emerging technologies division grew 20% to about $26 million. Similarly, the data communications division saw a 15% rise in revenue to $20.1 million.

For the first-quarter, the company recorded adjusted earnings of $23 million or $0.07 per share, compared to a net loss of $87.9 million or $0.45 per share. The Wall Street estimate of analysts was $0.06 per share for the first quarter. Cypress’ earnings were in line with per-share outlook in the range of $0.04 to $0.08. The company also gave the revenue guidance for the second-quarter. Cypress anticipate second-quarter revenue to range between $440 million and $470 million. The revenue estimate of analysts is $455 million.

The non-GAAP EPS outlook of the company is far higher than the analysts’ estimates. Cypress expects second-quarter non-GAAP earnings per share in a range of $0.10 to $0.14. The Wall Street estimates currently stands at $0.03 per share for the second- quarter.

The company also announced a quarterly cash dividend of $0.11 per share, payable on July 21, 2016.

During the first-quarter, Cypress introduced a low energy Bluetooth module to extend the range to 400 meters (eight times the distance covered by other modules). The company also introduced two families of 40nm ARM based microcontrollers, one each for automotive products and high volume consumer applications.

Cypress also announced that it will acquire the Broadcom’s business division, Internet of Things, for $550 million (all cash deal). The deal is expected to add $189 million to the revenue (trailing twelve months) of Cypress. With consumer and industrial Wi-Fi and Bluetooth connectivity growing at 17% annually, the deal, which is anticipated to close in the third quarter of 2016, will be earnings accretive in 2017. Thus, considering the positive facts, we can expect an uptrend in the share price in the weeks ahead.

The stock is trading above the 50-day moving average of 8.74. The chart also indicates a major support at 8.75. The first resistance to the uptrend exists at 10. The RSI indicator is tilted upwards and above the half way mark.

Cypress Semiconductor Corporation

Cypress Semiconductor Corporation

Thus, a binary options trader should look for one touch long call option contract with expiry between the 15 th and 20 th of June. A strike price of $10 or lower would enhance the probability of success in the suggested binary options trade.

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