Cirrus Logic downgraded by KeyBanc on Apple concerns

KeyBanc lowered Cirrus Logic's stock rating to Sector Weight from Overweight, citing concerns over its reliance on Apple and delayed diversification opportunities. Analyst John Vinh stated that Apple's potential decline in iPhone units for 2027 is a worry, as Cirrus Logic's revenues are estimated to be 80% tied to Apple. The stock is currently trading near its 52-week low at $108.34 and has dropped 31% over the past six months.

Despite the downgrade, InvestingPro data suggests the stock may be undervalued according to its Fair Value analysis, making it a potential opportunity among the Most Undervalued stocks list. Apple's decision to cut wafer starts for TSMC, resulting in a 15-20 million iPhone reduction, indicates a more cautious outlook on iPhone units in the near future.

Cirrus Logic's growth prospects are considered limited over the next six to 12 months. The PC segment, originally seen as a potential diversification opportunity, is now expected to decline by 10-15% this year due to high memory pricing. The PC diversification product cycle appears to be on hold until memory prices stabilize. Cirrus Logic's recent bid to acquire Synaptics was unsuccessful, which KeyBanc found concerning from a strategic perspective.

The company reported its first-quarter fiscal 2027 earnings with adjusted earnings of $1.84 per share, slightly exceeding Wall Street's forecast of $1.82. Revenue for the period stood at $459.7 million, marking a 13% increase from the previous year but below expectations. Despite this, Stifel adjusted its price target for Cirrus Logic, lowering it from $197 to $160 while maintaining a Buy rating.

These mixed developments highlight a cautious outlook for the company, with analysts pointing to the revenue shortfall despite the earnings beat.