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Bear of the Day: Cirrus Logic (CRUS)

Madeleine Johnson

Cirrus Logic (CRUS) is a semiconductor company that provides products for the world’s top smartphones, tablets, digital headsets, wearables and emerging smart home applications. Its products span the entire audio signal chain, and is known for producing high-performance, low-power ICs for audio and voice signal processing applications.

Q3 Earnings Beat, But Fall YoY

For Cirrus’ third quarter, earnings and revenues did beat the Zacks Consensus Estimate, but both fell significantly year-over-year (declines of 42.8% and 32.8%, respectively).

Additionally, revenue from portable audio products fell 34.2% from the prior-year quarter, while revenue from nonportable audio and other products was down 19% year-over-year.

The biggest concern for Cirrus is Apple (AAPL) and the decline in demand for iPhones. The company generated 83% of its revenue last quarter from the tech giant, who is its largest customer.

If the demand for iPhones don’t pick back up—and it’s not looking like that will happen any time soon—then Cirrus will have a difficult time finding that growth again.

Cirrus did end Q3 with $444 million in cash, which was up from $396 recorded at the end of Q2.

Estimates are Falling

Cirrus Logic, Inc. Price and Consensus

Cirrus Logic, Inc. Price and Consensus | Cirrus Logic, Inc. Quote

It didn’t take long for analysts to lower their estimates for fiscal 2019, and six have cut their earnings outlook in the last 60 days; our consensus has fallen 24 cents, down from $2.62 to $2.38 per share, and earnings could see year-over-year decline of 44%.

The consensus estimate has fallen for next fiscal year, too, down 70 cents from $2.80 to $2.10 per share. Five analysts have also cut their estimates for this time period as well.

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

Looking ahead, Q4 revenue is forecasted to be between $200 million and $240 million, with the midpoint representing a 27% year-over-year decrease. GAAP gross margin is expected to be between 49% and 51% for the quarter.

It does look like Cirrus is making progress on the Android side of its business, and the company is continually expanding into non-smartphone products. Its heavy reliance on Apple, however, is definitely going to hurt them in the short term.

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