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iPhone 7 Risks Lead PacCrest To Downgrade Cirrus Logic And Skyworks Solutions

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iPhone 7 Risks Lead PacCrest To Downgrade Cirrus Logic And Skyworks Solutions

Michael McConnell of Pacific Crest isn't bullish on Apple Inc. (NASDAQ: AAPL)'s iPhone 7 outlook, which prompted him to downgrade several names that take part in the company's supply chain.

According to McConnell's discussions with multiple supply-chain partners in Asia, the iPhone 7 demand is likely to see a disappointing demand, as units sold will be down 15 to 20 percent compared to iPhone 6s.

McConnell added that he expects component shipments to peak in September this year versus prior years due a lack of any significant innovation in the iPhone 7.

Cirrus Logic Downgraded To Sector Weight

McConnell downgraded shares of Cirrus Logic, Inc. (NASDAQ: CRUS) to Sector Weight from Overweight with no set price target from a prior $40 price target.

According to McConnell, Cirrus Logic is expected to be the biggest beneficiaries in terms of content from the iPhone 7 (in terms of a transition to a digital headset). However, the increased role in the device's design won't be sufficient to offset the expected 15 to 20 percent decline in total number of units shipped.

Related Link: Citi Cuts Apple's Second-Half Estimates, Sees Stock Range-Bound

McConnell now estimates fair value to Cirrus Logic's stock fair value to be in the range of $33 to $36 per share based on a 13x to 14x multiple on his 2017 earnings per share estimate of $2.55.

Shares of Cirrus Logic were trading lower by nearly 8 percent at $35.23 early Tuesday morning.

Skyworks Solutions Downgraded To Sector Weight

McConnell downgraded shares of Skyworks Solutions Inc (NASDAQ: SWKS) to Sector Weight from Overweight with no set price target from a prior $90 price target.

Similar to Cirrus Logic, the analyst doesn't believe gains in the RF content space will counteract a decline in overall shipments. In addition, the company will see further tailwinds from an inventory correction at Huawei and share loss to Murata.

McConnell now estimates fair value to Cirrus Logic's stock to be in the range of $60 to $67 per share based on a 11x to 12x multiple on his 2017 earnings per share estimate of $5.62.

Shares of Skyworks were trading lower by more than 5 percent at $59.42 early Tuesday morning.

Latest Ratings for AAPL

DateFirmActionFromTo
Dec 2019MaintainsOverweight
Nov 2019ReiteratesBuy
Nov 2019MaintainsOverweight

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