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Bear of the Day: Cirrus Logic (CRUS)

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Headquartered in Austin, TX, Cirrus Logic, Inc. (CRUS - Free Report) is a fabless semiconductor supplier, which develops, manufactures and markets analog, mixed-signal, and audio DSP integrated circuits (ICs).The company’s chips are used in a wide range of industrial and consumer markets including portable and non-portable media players, smartphones, tablets, home-theater receivers, automotive entertainment systems, televisions, docking stations, as well as wearables which includes, smart watches, action cameras, smart bands and VR headsets.

Why CRUS’s Q4 Earnings Disappointed

Shares of Cirrus plunged as much as 17.5% after the company’s fourth quarter update was released.

Sales fell 5% year-over-year to $293.5 million and adjusted earnings came to $0.66 per share, both missing the Street consensus of $302.5 million and $0.71 per share.

Like other chip makers, supply constraints impacted the company’s top line as well as its outlook for Q1 2022. Management set the midpoint of its current quarter revenue guidance 8% below projections.

Non-GAAP gross margin was 50.5%, while non-GAAP operating expenses came to $106 million.

Bottom Line

CRUS is now a Zacks Rank #5 (Strong Sell).

Six analysts have cut their full year earnings outlook over the past 60 days, with Cirrus’ bottom line expected to grow only 2.2% year-over-year. But Wall Street has raised its earnings picture for 2023, and next year’s consensus has increased five cents to $5.18 per share.

Shares have been volatile so far in 2021. Year-to-date, CRUS is down 3.5% compared to the Nasdaq and S&P 500’s gain of 9.2% and 13%, respectively.

Cirrus’ short-term weakness is a direct result of the global semiconductor shortage, and even though management expects this core issue to linger for a few more quarters, there’s no doubt the chip industry will recover in the long run. CRUS, then, could be ripe for a rebound once the chip industry’s manufacturing capacity gets back to normal.

Investors who are interested in adding a semiconductor stock to their portfolio could consider Advanced Micro Devices (AMD - Free Report) . AMD is a #2 (Buy) on the Zacks Rank, and 13 analysts have raised their earnings outlook for fiscal 2021, with bottom line growth of 67+%.

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