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Why Cypress Semiconductor (CY) Was Downgraded

Stocks in this article: CY

Story updated at 10 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Cypress Semiconductor (CY) was downgraded to "sector perform" from "outperform" by Pacific Crest Thursday.

Cypress fell 5% to $9.74 in morning trading.

Analysts John Vinh and Kevin Chen said the company is facing increased price competition and seeing turnover in management. The analysts also said the downgrade is because they are "less confident that Cypress can win" the Samsung Galaxy S5 mini, a phone which has not yet been announced.

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Separately, TheStreet Ratings team rates CYPRESS SEMICONDUCTOR CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CYPRESS SEMICONDUCTOR CORP (CY) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

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

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 38.9% when compared to the same quarter one year prior, rising from -$22.22 million to -$13.58 million.
  • Net operating cash flow has increased to $20.17 million or 16.58% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.07%.
  • CYPRESS SEMICONDUCTOR CORP has improved earnings per share by 40.0% in the most recent quarter compared to the same quarter a year ago. 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, CYPRESS SEMICONDUCTOR CORP reported poor results of -$0.32 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings ($0.50 versus -$0.32).
  • In its most recent trading session, CY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CYPRESS SEMICONDUCTOR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: CY Ratings Report

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