Exploring How Investors Can Protect Themselves From Future Losses After a Renowned Analyst Issues a Warning
Cirrus Logic (NASDAQ:CRUS) shares fell after receiving a warning from renowned tech analyst Ming-Chi Kuo. Kuo cautioned that Apple has reverted to its conventional physical buttons on the iPhone 15 instead of adopting one with a solid state button.
With Apple being responsible for more than 90% of Cirrus’s earnings it is taking a significant chance. However, there are promising opportunities outside of Apple that can help Cirrus to expand its reach.
Risques in the Supply Chain
In the wake of Ming-Chi’s claim there was a possibility that Apple (NASDAQ.AAPL:AAPL), won’t employ Cirrus Logic’s tech for the new iPhone Cirrus Logic’s share price dropped significantly. This is particularly concerning as Apple makes up the largest percentage of Cirrus’s revenue.
However, the stock still has plenty of room to increase its reach beyond its biggest customer. Its audio chips are utilized in various products, including laptops. Additionally, there are potential new market opportunities for its audio chips like adjustable noise-canceling headphones, as well as voice control.
Even though Cirrus has a bright future but it’s crucial to be aware that supply chain risks could hinder its growth. The possibility of theft of semiconductors is not limited to China however, it also rises when there is no oversight or government intervention in U.S. semiconductor production. To address this threat, policymakers should develop standards regarding security of semiconductors that will be accessible to all major producers and consumers of semiconductors. It could reduce the possibility of hacking and protect U.S. hardware’s reputation.
Reliance on Apple
Cirrus logic could experience greater than 12 percent decrease as a result of an analyst’s review on Apple’s (AAPL) new iPhone 15 series phones. The company is the exclusive manufacturer of the controller chip for the device’s brand new, solid-state button.
TF International Securities analyst Ming-Chi Kuo stated in a note from April 12 that the design shift would be “particularly unfavorable” to Cirrus Logic because it had been expecting Apple to boost its revenue as well as profits, by moving away to physical buttons.
AAPL has experienced slow smartphone sales, but it’s expected to begin ramping up production for the new generation iPhone during September quarter. That should help drive an increase in the number of units produced by Cirrus. The company has a history of reporting lower revenues during the quarter ending June, as it begins winding down older iPhones to prepare for the new models that will be released later in September.
Opportunities for growth in other Markets
The shares fell by 12% following Ming-Chi Koo, an eminent analyst in the field of technology, voiced concern about Cirrus Logic CRUS shares. The stock fell after Kuo stated that Apple might drop its Solid-state buttons in its iPhone 15 Pro and Pro Max models to go with traditional physical buttons.
This could decrease demand for Cirrus’s audio chips and chip haptic motors. The company earned 88% of its revenues from Apple in the fiscal year 2013, making it highly dependent on the iPhone maker.
But, Susquehanna analyst Christopher Rolland believes that the relationship between Apple as well as Cirrus Logic is tightening and driving exponential growth of the business. Also, Rolland believes that the business’s robust balance sheet, no longer-term debt, and its share purchase policy can help to create having a positive multiple of P/E.
The company’s high-precision digital and mixed-signal integrated circuits are used for a wide range of industrial and household applications. Its audio solutions for mobile devices sell to smartphone makers. The company’s audio products that are not portable and its other offerings focus on the industry and energy sectors.
Cirrus Magic is an analogue, mixed-signal and audio DSP integrated circuit (IC) manufacturer. Its chips are used for a variety of industrial and consumer sectors, which include portable audio devices like mobile phones and tablet computer systems, as well as truly wireless headsets, home-theater systems, automotive entertainment systems and professional software.
The principal product lines offered by the company include Audio and High Performance Mixed-Signal. The Audio division makes low-power precise audio components designed specifically intended for mobile phones and also consumers.
High-Performance mixed-signal is the division that offers a variety of digital-to-analog conversions (DACs, ADCs), and various other equipment. These products can be found throughout the industrial sector which include energy, automotive, and other.
The revenue of the company is heavily contingent upon its biggest customer, Apple. Cirrus Logic could see a drop in iPhone 7 shipments as a consequence of the dismantling of the headphone jack. This could result in an adverse impact on the company’s revenue. The company could also suffer from the loss of other customers from using Cirrus Logic’s products.