Cirrus Logic, Inc. CRUS slashed its fiscal third-quarter revenue guidance, citing recent softness in the smartphone market.
The Analysts
KeyBanc Capital Market's John Vinh maintained a Sector-weight rating on Cirrus Logic.
Bank of America Merrill Lynch analyst Adam Gonzalez reiterated an Underperform and lowered the price target from $31 to $29.
KeyBanc: Weakness Centered On iPhone XR
The guidance cut is mainly related to disappointing iPhone XR demand, which was highlighted in preannouncements by several of Cirrus' peers, KeyBanc's Vinh said in a Monday note.
Cirrus lowered its Q3 revenue estimate from a range of $360 million-$400 million to $300 million-$340 million, and the operating expenditure guidance from $105 million to $102 million, the analyst said.
Gross margin guidance was left unchanged at 50 percent, Vinh said.
KeyBanc lowered its fiscal 2020 revenue and EPS estimates for Cirrus from $1.36 billion and $3.19, respectively, to $1.29 billion and $2.86.
BofA Cautious On Cirrus Due To Customer Concentration
Apple Inc. AAPL accounts for roughly 80 percent of Cirrus' sales, BofA's Gonzalez said in a note.
The negative preannouncement by Cirrus, which supplies $4 to $5 of audio chip content in the iPhone, implies an iPhone production cut of 12-15 million units, the analyst said.
Although this was in-line with expectations following warnings issued by peers, Gonzalez sees Cirrus' announcement as a negative read for mobile semiconductor companies, especially Skyworks Solutions Inc SWKS.
The next Apple-related data point will come in the form of Broadcom Inc AVGO's Q3 results due Dec. 6, the analyst said.
BofA lowered its 2019 and 2020 sales estimates for Cirrus by 2 percent and 3 percent, respectively, and reduced EPS estimates by a steeper 4 percent.
Gonzalez said he expects Cirrus to gain content in the Android ecosystem in calendar 2019.
"However, we remain cautious given persistent customer concentration risks at Apple where CRUS content has been stagnant and where units now appear to be wavering as well."
The Price Action
Cirrus Logic shares were down 1 percent at $38.28 at the time of publication Tuesday.
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