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Applied Micro Circuits Slips to Sell on Weak Q1 Earnings

Zacks Equity Research

Zacks Investment Research downgraded Applied Micro Circuits Corporation (AMCC) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold) on Aug 2. This was primarily due to a downward estimate revision in response to soft first-quarter fiscal 2015 results announced on Jul 29.

Why the Downgrade?    

Applied Micro Circuits reported first-quarter adjusted earnings at break-even levels. Net revenues of $50.3 million fell 7% year over year, missing the Zacks Consensus Estimate of $52.0 million. A sharp decline in sale of the company’s legacy PowerPC embedded products was the main reason behind the drag in revenues. However, the company witnessed some strength in its connectivity sales, and is optimistic regarding its X-Gene server and X-Weave growth initiatives.

On a GAAP basis, Applied Micro Circuits reported a net loss of 17 cents per share, compared with a net income of 30 cents per share in the prior-year quarter. Operating expenses soared 76.8% year over year, hurting the bottom line.

But investors were disappointed by the weak guidance. The company anticipates second-quarter fiscal 2015 revenues in the range of $42–$46 million, as legacy PowerPC sales look set for further decline. Adjusted earnings per share are also expected to lie in the red for the coming quarter.

With estimates going down in the past week, Applied Micro Circuits has witnessed negative estimate revision for the current year. The Zacks Consensus Estimate for second-quarter fiscal 2015 declined to a loss of 10 cents per share from earnings of 3 cents during this period, while for full-year fiscal 2015, it dropped to a loss of 28 cents per share from earnings of 3 cents.

Other Stocks to Consider

Better-ranked stocks in the industry include NVE Corp. (NVEC), Silicon Motion Technology Corp. (SIMO) and Avago Technologies Ltd (AVGO). While NVE and Silicon Motion sport a Zacks Rank #1 (Strong Buy), Avago holds a Zacks Rank #2 (Buy).

Read the Full Research Report on AMCC
Read the Full Research Report on AVGO
Read the Full Research Report on SIMO
Read the Full Research Report on NVEC

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