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Up almost 1.5x from its low in March 2020, at the current price of $82 per share, we believe Cirrus Logic stock (NASDAQ: CRUS) has further upside potential. Cirrus Logic, a semiconductor supplier, has seen its stock rise from $56 to $82 off its March 2020 low, less than the S&P which increased by around 90% from its lows. Further, the stock is still around the same level it was at before the pandemic. We believe that Cirrus Logic stock could rise around 25% to regain its early-2021 high of $103, driven by expectations of continuing demand growth, and strong full-year 2021 earnings. Our dashboard What Factors Drove 147% Change In Cirrus Logic Stock Between 2018 And Now? has the underlying numbers behind our thinking.

CRUS stock’s rise since late-2018 came due to a 15% rise in revenue from $1.19 billion in FY 2019 to $1.37 billion in FY 2021 (Cirrus Logic’s fiscal year ends in March). Lower operating expenses helped drive net margins from 7.6% to 15.9%, despite a rise in the effective tax rate. This led to EPS (earnings-per-share) rising from $1.50 to $3.74.

However, the company’s P/E (price-to-earnings) multiple has risen from 22x in 2018 to 30x by late 2020, but has since dropped back to around 22x currently. We believe that the company’s P/E ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of coronavirus and the resulting lockdowns hampered semiconductor demand across a variety of industries, but the trend has since changed. This is evident from Cirrus Logic’s full-year 2021 earnings (for FY ending March), where revenue came in at $1.37 billion, up from $1.28 billion in FY 2020. With R&D and SG&A expenses coming in lower, and a $21 million drop in restructuring charges, operating income jumped from $173.5 million to $237 million over this period, helping drive EPS up from $2.74 to $3.74.

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Additionally, while Apple is currently Cirrus’ largest client with almost 80% of the company’s sales coming from Apple, the company has announced plans to amp up their power and audio components sales to Android players. We believe demand for the company’s products will keep rising steadily, and that revenues will continue to benefit from this. Further, if the company can continue keeping expenses in check, a rise in investor expectations could drive up the company’s P/E multiple, helping the stock regain its early-2021 highs of $103, an upside of around 25% from current levels.

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