Back to top

Bear of the Day: Cirrus Logic (CRUS)

Read MoreHide Full Article
Cirrus Logic (CRUS - Free Report) is a key Apple (AAPL - Free Report) supplier that peaked above $70 almost a year ago and has had a rough go of it since as investors have grown concerned about its leverage in the iPhone-maker's product cycles.
 
My colleague Neena Mishra wrote about CRUS as the Bear of the Day in mid-March when shares were still trading above $43. They went on to new 52-week lows in April. Here's how she described the situation at the time...
 
Founded in 1984 and headquartered in Austin, Texas, Cirrus Logic is a fabless semiconductor supplier, which develops, manufactures and markets analog, mixed-signal, and audio DSP integrated circuits (ICs).
 
The company’s product lines include portable audio products and non-portable audio and other products.
 
Their audio chips are used in the leading smartphone brands, tablets, digital headsets, wearables and many emerging smart home applications.
 
Apple is CRUS’s largest customer, accounting for ~80% of the revenue though the company develops solutions for many industry leading global brands.  
 
Weak Earnings
 
The company reported weak results for third-quarter fiscal 2018. Non-GAAP earnings of $1.59 per share missed the Zacks Consensus Estimate of $1.77 and were also down 15% year over year.
 
Total revenues were down about 7.7% year over year and missed our estimate. They were also short of the guided range well.
 
“Unanticipated weakness in smartphone demand that materialized in late December drove our Q3 results below expectations and further impacted our Q4 guidance,” said the CEO.
 
Estimates Plunging
 
After weak results, analysts have cut their estimates for the company. Zacks Consensus Estimate for the current year and next fiscal year have fallen to $4.36 per share and $3.95 per share respectively, down from $4.82 and $4.87, before the results. Falling estimates sent the stock to a Zacks Rank #5 (Strong Sell).
 
(end of excerpts from Neena Mishra's March report)
 
Since then, the EPS estimates have only plunged further as follows...
 
Fiscal 2019 (end in March): Drops from $3.95 to $2.99, a 24% crater
 
Fiscal 2020: Drops from $4.44 to $3.27, over a 26% plunge
 
Here's what these drops look like on the proprietary Zacks Price & Consensus chart, which plots the changes in annual EPS estimates against the stock price...
 
 
This is the price of being so heavily tethered to Apple. I don't know all the dynamics of how Cirrus falls out of favor in the Apple product mix, but I trust that a large group of analysts have spoken in these huge downward estimate revisions.
 
Until these estimate stop going down, best to stand aside.
 
The Hottest Tech Mega-Trend of All
 
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
 



In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Cirrus Logic, Inc. (CRUS) - free report >>

Apple Inc. (AAPL) - free report >>

More from Zacks Bear of the Day

You May Like