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Cirrus Logic (CRUS) Tumbles on Apple's (AAPL) Ouster

NEW YORK (TheStreet) -- Shares of Cirrus Logic (CRUS - Get Report) tumbled after Barclays research note Apple's (AAPL - Get Report) iPad Air does not contain the circuit maker's audio amplifier.

Breaking apart the iPad Air, tech site iFixit found no Cirrus amplifier socket while Chipworks detected competitor Maxim Integrated Products' amplifier chip in its place. 

"This loss is a clear negative for Cirrus for not only the near-term impact but also what this signals for future iPads and iPhones," said Barclays analyst Blayne Curtis in a research report.

The investment firm reiterated its "underweight" rating and $16 price target. Barclays cut its rating late October on the belief the semiconductor company was relying too heavily on Apple.

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Barclays predicts Cirrus likely lost the amplifier socket in the Retina Mini iPad as well, indicating it will be absent from future iPads and the iPhone6. The loss of the amplifier socket in the Air and Mini alone accounts for a loss of $30 to $40 million in annual revenue for full-year 2014.

"We believe there is potential for Apple's entire product line to move away from Cirrus amps over the coming year, which would imply a total revenue drop of [more than] $150 million annually," wrote Curtis.

In the fiscal year ended March, Apple contracts represented 82% of Cirrus' total sales.

By midday, shares had plunged 12.9% to $19.37, while Maxim gained 0.38% to $28.98.

TheStreet Ratings team rates Cirrus Logic Inc as a Buy with a ratings score of B-. The team has this to say about their recommendation:

"We rate Cirrus Logic Inc (CRUS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CRUS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.31, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, Cirrus Logic Inc's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 212.77% to $54.39 million when compared to the same quarter last year. In addition, Cirrus Logic Inc has also vastly surpassed the industry average cash flow growth rate of -30.5%.
  • Cirrus Logic Inc's earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Cirrus Logic Inc increased its bottom line by earning $1.99 a share vs. $1.30 a share in the prior year. This year, the market expects an improvement in earnings ($2.65 vs. $1.99).

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