Why Cypress Semiconductor Corporation Stock Soared 33.2% in 2017

Small semiconductor chip sitting on top of a penny

What happened

Shares of Cypress Semiconductor (NASDAQ: CY) gained 33.2% in 2017, according to data from S&P Global Market Intelligence , as the company enjoyed the fruits of recent acquisitions and successfully followed its "Cypress 3.0" strategy of targeting markets growing faster than the overall semiconductor market.

In fact, much of Cypress' gains came early in the year, with shares rising nearly 30% through late March on the heels of its better-than-expected quarterly report in early February. In that report, Cypress showcased significant year-over-year revenue gains from its 2016 acquisition of Broadcom's connectivity business, and strong new cost synergies realized from its acquisition of Spansion in early 2015. All the while, Cypress changed its corporate structure from four divisions to two -- a microcontroller and connectivity division (MCD) and a memory products division (MPD) -- to more effectively target the highest-growth verticals in the broader embedded semiconductor industry.

So what

More specifically, Cypress had its eyes on the consumer, industrial, and automotive markets, especially relating to opportunities within the Internet of Things -- that is, the trend of adding internet connectivity to everyday things that might otherwise not have it.

But Cypress stock still traded sideways for the next six months or so despite handily exceeding its guidance in each of its next two quarterly reports in April and July , setting new revenue records, expanding gross margin, and growing its customer base by continuing to implement this strategy.

Most recently, Cypress stock resumed its upward march leading up to and following its equally impressive third-quarter results in late October. Revenue and adjusted earnings per share climbed more than 15% and 80%, respectively, including strength across all key markets and 80% growth in Internet of Things wireless connectivity revenue.

"Our customers are relying on us for more bill-of-material coverage," elaborated CEO Hassane El-Khoury, "with approximately 80% of our revenue generated by customers buying more than one product family across connectivity, microcontrollers and memory."

Now what

As it stands, barring an unscheduled update from management, investors will need to wait until early February for more color on Cypress' most recent progress in further penetrating its key growth markets. Overall, it was no surprise to see Cypress investors so aggressively bidding up the stock to near a five-year high in 2017.

10 stocks we like better than Cypress Semiconductor

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Cypress Semiconductor wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 2, 2018

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Cypress Semiconductor. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.