Why the Recent Warning from a Renowned Analyst Could Spell Trouble for Cirrus Logic
Cirrus Logic (NASDAQ:CRUS) shares fell after receiving a warning from renowned tech analyst Ming-Chi Kuo. Kuo said that Apple would revert back to conventional buttons that are on the iPhone 15 and not adopt a solid-state design.
This is an important risk, as Apple is responsible for nearly 90% of the company’s revenues. However, Cirrus can still expand its operations by taking advantage of various other possibilities.
Risques in the Supply Chain
The report of Ming-Chi-Kuo claimed the fact that Apple (NASDAQ.AAPL:AAPL) isn’t planning to employ Cirrus Logic’s tech for the future iPhone Cirrus Logic’s share price fell significantly. This is especially worrying since Apple accounts for the largest share of Cirrus’s revenue.
The stock offers plenty of space to increase its reach beyond its biggest customer. The company’s audio chips can be included in numerous products such as laptops. It is also possible to create other market opportunities for its audio chips like the use of adaptive noise cancelling headphones as well as voice control.
While Cirrus could have a bright future however, it’s important to be aware the risk to supply chain security might hinder its expansion. In particular, the government’s oversight as well as intervention into U.S.-based production of semiconductors raise the possibility of chip sabotage and isn’t just limited to China. It is essential for policy makers to establish standards that ensure semiconductor security for all producers of semiconductors and their users. It could reduce the possibility of sabotage and preserve U.S. hardware’s reputation.
Rely on Apple
An article by a well-known analyst regarding Apple’s (AAPL) coming iPhone 15 series of phones may result in a decrease of 12 percent for the manufacturer, Cirrus Logic. It is the supplier of the controller chip in the brand new phone’s solid-state buttons.
TF International Securities analyst Ming-Chi Kuo stated in an April 12 note that the design shift would be “particularly negative” to Cirrus Logic because it had previously hoped for Apple to improve its sales and profits by shifting away to physical buttons.
Although AAPL’s sales of smartphones have been slowing, it’s scheduled to ramp up production of the next generation iPhone starting in September. This will drive Cirrus’ growth in volume of units. While it is preparing for the September arrival of new iPhones Cirrus has seen smaller revenues than in prior quarters.
Opportunities to Grow in Other Markets
Shares plummeted by 12 percent after Ming-Chi Koo, an eminent tech analyst , expressed concern over Cirrus Logic CRUS shares. The shares fell when Kuo declared that Apple would abandon the Solid-state buttons in its iPhone 15 Pro and Pro Max models to go with the traditional buttons.
The change could reduce demand for Cirrus Logic’s audio chips and chip haptic engines. The company accounted for 88% of its revenue from Apple in fiscal 2013, so it’s highly dependent on the iPhone maker.
However, Susquehanna analyst Christopher Rolland believes the relationship with Apple and Cirrus Logic is tightening and driving outsized growth of the business. Rolland thinks the firm’s strong balance sheet of the company and its absence of longer-term debt and its the policy of repurchases for shares could assist to create an increase in the PE multiple.
The high-precision mixed signal and analog integrated circuits manufactured by the company are commonly used in both commercial and industrial applications. The company’s audio portable products are sold to manufacturers of mobile devices, however its audio that is not portable and other offerings target the energies and industries.
Cirrus Magic is an analogue, mixed signal and audio DSP integrated circuit (IC) supplier. The company’s products are employed for a variety of industrial and consumer sectors, which include portable audio devices, mobile phones and tablet computers, wireless home theater systems, wireless headsets including automotive entertainment systems as well as professional applications.
The company’s main product lines are High Performance and Audio Mixed-Signal. The Audio Division manufactures low-power high-precision components audio to mobile devices as well as the mass market.
High-Performance mixed-signal division is one that provides a broad range of digital to-analog converters (DACs, ADCs), and other products. They are utilized in the fields of energy, transportation, as well as other markets for industrial.
The company’s revenues are largely contingent on its largest customer, Apple. Cirrus Logic could see a decline on iPhone 7 shipments as a result of the removal of the headphone jack. The change could have an adverse impact on the company’s profits. If users stop their use of the products, then the company could as well be affected.