Cypress Semiconductor Corporation (NASDAQ:CY) — Shares of CY stock made a new 52-week high last week following the company’s Q2 earnings report. Cypress Semiconductor reported adjusted earnings of 12 cents per share, in line with analysts’ estimates. Revenue of $456.4 million beat expectations of $455.2 million, and the company delivered upbeat guidance for the third quarter.
Following the announcement, S&P Capital IQ Equity Research reiterated its “Buy” rating on CY stock and increased its 2016 and 2017 earnings projections. Capital IQ forecasts a sales increase of 16% this year and 10% next year, aided by the March 2015 acquisition of Spansion, which it sees increasing revenues in the automotive and industrial sectors.
Its analysts also note Cypress Semiconductor reduced its low-margin business in favor of emerging opportunities, such as the connected car/home. Capital IQ believes the company could achieve an operating margin of 20% in the future. Its $14 price target for CY stock is based on a P/E of 16.3 times its 2017 EPS estimate of 86 cents.
Turning to the chart, we see that CY stock broke a bearish resistance line at about $7 in February. In fact, it crushed it and jumped through its 50-day moving average at $8 by March 3. The high at $8 evolved into the start of a bullish resistance line and bull channel.
CY stock advanced within the confines of the channel with the exception of two penetrations above it. The first was in June at over $11, and the second occurred a week ago at over $12. But both quickly reversed and shares fell back into the channel.
The July 28 reversal was accompanied by a sell signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), but this stock is making a powerful bull move. Therefore, traders should look to buy CY stock on a pullback below $11 with a price target of $14 for a potential gain of more than 25%. Cypress Semiconductor also pays an annual dividend of 44 cents per share for a forward yield of 3.9%.
