2 Apple Suppliers Ripe for a Holiday Rally

Cirrus Logic, Inc. (CRUS) and Skyworks Solutions Inc (SWKS) have emerged as a couple of the best Thanksgiving-week performers

by Andrea Kramer

Published on Nov 18, 2015 at 1:34 PM

Apple Inc. (NASDAQ:AAPL) suppliers Cirrus Logic, Inc. (NASDAQ:CRUS) and Skyworks Solutions Inc (NASDAQ:SWKS) are both higher today, enjoying a halo lift from AAPL's upbeat analyst attention. In fact, SWKS is in the black, even after Microsemi Corporation (NASDAQ:MSCC) once again upped its bid for Skyworks-pursued PMC-Sierra Inc (NASDAQ:PMCS). What's more, if recent history is any indicator, CRUS and SWKS could be ripe for a holiday rally.

According to Schaeffer's Senior Quantitative Analyst Rocky White, CRUS and SWKS have emerged as two of the best-performing stocks during Thanksgiving week, going back 10 years -- similar to this pair of travel names. Both stocks have ended the holiday-shortened week on the plus side 80% of the time, with CRUS and SWKS racking up average returns of 4.3% and 3%, respectively. 

Plus, both CRUS and SWKS have attractively priced short-term options, historically speaking. CRUS' 30-day at-the-money (ATM) implied volatility (IV) sits at 46.3%. Meanwhile, the equity's 30-day historical volatility (HV) rests at 80.2%, higher than 99% of all other readings from the past year. Echoing this, CRUS sports a Schaeffer's Volatility Scorecard (SVS) of 82 -- indicating the stock has tended to make outsized moves on the charts during the past year, relative to what the options market has priced in.

SWKS' 30-day ATM IV is 40%, in the middling 41st percentile of its annual range. Meanwhile, its 30-day HV of 51.9% stands just 6 percentage points from an annual high. As with CRUS, Skyworks' SVS echoes this, docked at a modestly high 73.

From CRUS' current perch at $29.63 -- a gain of 2.4% on the day -- another 4.3% rally during the week of Thanksgiving would put the shares around $30.90. The current volume-weighted average price (VWAP) of the weekly 11/27 29.50-strike call -- which expires on Black Friday -- is $0.75, making at-expiration breakeven $30.25 (strike plus VWAP). In other words, buyers of the call would profit the higher CRUS soared atop $30.25 through next Friday's close.

From SWKS' price of $79.17 -- up 2.6% from yesterday's close -- a repeat 3% surge would put the shares at $81.55. The equity's weekly 11/27 79-strike call is trading at a VWAP of $1.82, making at-expiration breakeven $80.82.

However, betting bullishly on Cirrus Logic, Inc. (NASDAQ:CRUS) and Skyworks Solutions Inc (NASDAQ:SWKS) would be a change of pace for the stocks, even though both boast healthy year-to-date gains. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), option buyers have placed bearish bets over bullish at a faster-than-usual clip during the past two weeks. CRUS' 10-day put/call volume ratio of 0.83 stands higher than four out of five readings from the past year, while SWKS' ratio of 0.77 sits in the 72nd percentile of its annual range.

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