Valens Research Weekly Equity Idea Highlight for February 27, 2019 – Cirrus Logic, Inc.

Given management’s confidence about closed-loop controllers and voice biometrics, bearish market expectations are unwarranted, and upside is likely

Market expectations for CRUS are currently very pessimistic. The market is expecting UAFRS-based (Uniform) ROA (ROA’) to fade from 78% in 2018 to 31% in 2023, with Uniform Asset growth slowing to 10% a year going forward. The market appears to be concerned about their legacy GPO business and competition there, while the company has been focused on building other businesses around their GPO business, to defend that moat and expand to higher value add services.