Story updated at 10 a.m. to reflect market activity.
Shares of Cirrus Logic were falling 0.2% to $22.90 in morning trading.
"Our short thesis was based on the belief that incremental ASP/margin pressure from top customer Apple (AAPL) combined with CRUS exhausting its NOLs to become a tax-payer beginning early in 2015 would lean on EPS...and the stock," analysts Rick Schafer, Shawn Simmons, and Joseph Zaccaria wrote, adding that those negative events "have now largely played out."
The analysts expect potential for some upside is Smart Codec content gains at Apple, or if Android designs "materialize."
"Our cautious outlook centered on a dearth of new features/functionality creating ASP/margin pressure at top customer Apple (70%+ of sales). Despite its retaining the IP6 amp socket, we estimate dollar content dropped 25%-plus to ~$2.15 from 5s/5c (after dropping 30%-plus in IP5). CRUS' new 55nm "Smart Codec" (integrated codec+DSP) could help reverse this trend," the analysts wrote.
Separately, TheStreet Ratings team rates CIRRUS LOGIC INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate CIRRUS LOGIC INC (CRUS) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 18.7%. Since the same quarter one year prior, revenues rose by 10.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, CRUS has a quick ratio of 1.87, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for CIRRUS LOGIC INC is rather high; currently it is at 51.18%. Regardless of CRUS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CRUS's net profit margin of 0.40% is significantly lower than the industry average.
- 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 97.4% when compared to the same quarter one year ago, falling from $33.37 million to $0.85 million.
- 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. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CIRRUS LOGIC INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: CRUS Ratings Report