Applied Micro Circuits Corp Stock Downgraded (AMCC)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Applied Micro Circuits (Nasdaq: AMCC) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and generally disappointing historical performance in the stock itself.

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Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 220.3% when compared to the same quarter one year ago, falling from $10.86 million to -$13.07 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.96%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 213.33% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, APPLIED MICRO CIRCUITS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • AMCC, with its decline in revenue, underperformed when compared the industry average of 8.9%. Since the same quarter one year prior, revenues slightly dropped by 7.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • APPLIED MICRO CIRCUITS CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, APPLIED MICRO CIRCUITS CORP continued to lose money by earning -$0.10 versus -$2.04 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus -$0.10).

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