Tuesday sent a flurry of bad news towards
Cirrus Logic (
as the company finished the day down roughly 4.5%. The sharp move
lower came on elevated volume-which was roughly twice a normal
day-and was largely due to earnings weakness in consumer
This Apple weakness drove down Cirrus because CRUS is almost
entirely dependent on Apple for its revenues. In fact, some
estimates have close to 85% of Cirrus' revenues
coming from Apple, so any weakness in the company's demand outlook
could spell bad news for CRUS.
If that wasn't enough, Cirrus was reporting its own earnings after
the bell, an event that looked to also drive the company's stock.
The firm did manage to top the consensus for both revenue and
earnings, but guided the current quarter's revenues significantly
below the consensus.
Now, the company is looking for revenue in a range between $130
million to $150 million, a figure that was well below the average
$175 million estimate. Thanks to this significantly reduced
guidance, CRUS sold off after hours too, falling another 5% in the
Recent History and Outlook
Cirrus Logic had been seeing rising estimates coming into this
earnings report, including a huge increase in the consensus
estimate. In just the past three months, the current year EPS
estimate rose from $2.04/share to $2.32/share, so this sudden
reversal for the company isn't exactly priced in.
Instead, we could see estimates fall over the next few days for
CRUS, especially if Apple fails to announce any new products
shortly, or soothe investor worries about demand for
various 'iProducts'. Growth was already contracting for the
company even before this report, so we could see some serious cuts
to year-over-year estimates, further signaling how dramatic the
turn has been in CRUS.
I expect CRUS to fall from its solid Zacks Rank in short order,
especially once analysts start to revise their numbers lower based
on both the news from Apple, and the Cirrus Logic management
guidance. If this happens, the stock may be poised to continue its
rough patch, particularly since CRUS is in the bottom 50% for
industry rank too.
Given all of these factors, it appears as though you might want to
hold off on adding a position to CRUS, at least until more
estimates come out on the stock. If estimates remain stable,
this might be an interesting entry point, though if we see analysts
give up on the company in the near term, it could be time to avoid
this Apple-dependent company until it can truly turn things around.
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