QuickLogic QUIK shares have plunged 48.4% year to date (YTD) against the Zacks Internet – Software industry’s growth of 9%.
QUIK stock has also underperformed the Zacks Computer and Technology Sector and S&P 500 index in the YTD period. The Zacks Computer and Technology sector and the S&P 500 index have returned 13.6% and 14.4%, respectively, YTD.
Given QuickLogic’s dominant position in the eFPGA market, this underperformance is disappointing. This raises a crucial question for investors: Is it time to hold or sell the stock?
QUIK Grapples With Sluggish Growth
QuickLogic has been suffering from scheduling delays that forced management to reduce the revenue outlook for the full-year growth projection. The scheduling delays will hurt the top line in the near term as revenues from the contracts will be reflected in later periods.
At present, QUIK’s IP contracts are showing weakness as they are still in their deliverable phase, resulting in lower revenue realization. The company expects this division to contribute to the top line from the fourth quarter. QuickLogic's Storefront and Chiplet business is also expected to start contributing in early 2025, which makes the near-term outlook less optimistic.
QuickLogic YTD Performance
Image Source: Zacks Investment Research
QuickLogic faced higher-than-anticipated cash usage in the second quarter. This was mainly due to the timing of payments related to its Strategic Radiation Hardened FPGA government contract. The company’s cash, cash equivalents and restricted cash fell to $23.3 million from the previous quarter’s $27.4 million.
Rising Competition in the Rad-Hard FPGA Market
The Rad-Hard FPGA market is dominated by major players who invest substantial resources into optimizing their FPGA products for reduced size, weight and power. Additionally, this market is less sensitive to price, facilitating the entry of large semiconductor companies.
Large corporations, including Advanced Micro Devices AMD, Microchip Technology MCHP and Intel INTC operate in this space. AMD’s subsidiary, Xilinx Inc., competes directly with QuickLogic’s discrete FPGA products for defense and aerospace.
Advanced Micro Device’s Xilinx produces space-grade Virtex-5QV FPGA, while Microchip develops radiation-tolerant RTG4, RTAX-S/SL and RTAX-DSP series FPGAs. Intel’s Agilex series is a defense-grade FPGA. INTC also has the advantage of owning foundries, which makes it less dependent on third parties, unlike QUIK, which operates fabless.
What Investors Should Do With QUIK Stock
QuickLogic’s near-term prospects might be hurt by scheduling delays, lower revenue realization and liquidity. Also, QUIK currently has a Value Score of F, suggesting a stretched valuation.
Considering all these factors, we suggest investors to stay away from investing in this Zacks Rank #4 (Sell) stock at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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QuickLogic Corporation (QUIK) : Free Stock Analysis Report
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