Analyzing the Reasons Behind Cirrus Logic’s Stock Decline Following a Warning From a Renowned Analyst
In response to a warning from Ming-Chi Kuo that Cirrus Logic’s shares fell. Kuo cautioned that Apple has returned to its traditional physical buttons in the iPhone 15 instead of adopting the solid-state design of its buttons.
It is a significant risk, as Apple accounts for almost 90% of the Cirrus’s revenue. Still, there are some potential opportunities that aren’t tied to Apple that could assist Cirrus increase its revenue.
The Supply Chain and Risques
Cirrus Logic shares fell significantly after a report from analyst Ming-Chi Kuo that claimed Apple (NASDAQ:AAPL) won’t be using the company’s technology for the next iPhone. This is particularly concerning as Apple represents the lion’s share of Cirrus’s earnings.
But, it is able to expand beyond its largest customer. The firm’s audio chips can be present in various products like laptops. Additionally, it has a range possible markets including adaptive noise cancelling headsets as well as auto voice control.
While a strong future looks promising for Cirrus but investors must be aware of the supply chain risks that could hamper its growth. The danger of theft of chips is not limited to China It also gets worse in the absence of oversight or intervention from the government for U.S. semiconductor production. To address this threat and to ensure that standards are developed, policymakers need to develop guidelines regarding security of semiconductors that are open to all major consumers and producers of semiconductors. This will help reduce any threat to sabotage while preserving U.S.-origin technology’s reputation.
Rely on Apple
A major analyst of Apple’s (AAPL) coming iPhone 15 series of phones may result in a drop of over 12% for the supplier, Cirrus Logic. It is the only manufacturer of the controller chip that will be used in the phone’s innovative solid-state buttons.
TF International Securities analyst Ming-Chi Kuo noted in a statement on April 12 that the shift in design could be “particularly negative” to Cirrus Logic because it had anticipated Apple to improve its sales as well as profits, by moving away to physical buttons.
AAPL has experienced low sales of smartphones, however it is expected to begin increasing production of the next generation iPhone during September quarter. This will help boost increases in the volume of units sold by Cirrus. In preparation for the coming of the September release of new iPhones Cirrus has also reported lower revenue during the previous quarters.
Potential Opportunities for Growth in Other Markets
In the wake of a renowned tech analyst, Ming-Chi Kuo raised concerns about Cirrus Logic CRUS shares, the stock fell 12%. When Kuo declared that Apple will abandon the solid-state buttons on The iPhone 15 Pro Max and Pro Max models, shares fell to 12%.
It’s possible that this will result in less demand for the Cirrus Logic chip’s audio chip and haptic engine. The company accounted for 88% of its earnings from Apple during fiscal 2013, making it highly dependent on the iPhone maker.
But, Susquehanna analyst Christopher Rolland believes that the relationship with Apple and Cirrus Logic is tightening and driving outsized growth for the firm. Furthermore, Rolland believes that the strength of the financial position, its balance sheet and lack of long-term debt and share repurchase policy could support a positive P/E multiple.
The company’s high-precision digital and mixed-signal integrated circuits are used in a variety of industrial and household applications. Its portable audio products are sold to mobile device makers, in contrast, its non-portable music and other offerings target the industries and energy sectors.
Cirrus Logic supplies mixed-signal and analog audio DSP integrated Circuit (IC). The chips it makes are utilized in various industrial and consumer sectors, which include portable audio devices such as mobile phones, tablet computer systems, as well as truly wireless home theater systems, wireless headsets, automotive entertainment systems and professional applications.
Its product lines are mostly focused at two segments of its product line that are: High-Performance and Audio. The Audio division manufactures low-power, high-precision audio components intended for mobile phones and also the consumer market.
The company’s High-Performance mixed-signal division is a leading provider of digital-to-analog converters, DACs as well as ADCs. The products it offers are utilized in the fields of energy, transportation, and various other industries.
Its earnings are heavily dependent on its largest customer, Apple. The drop from iPhone 7 shipments due to the removal of headphone ports could negatively impact Cirrus Logic’s earnings. If CirrusLogic customers cease from using their products, then the company could be affected too.