$AAPL Drops 5.5% on Cirrus Logic Guidance

| Analysis

Shares of Apple Inc. dropped more than 5.5 percent on Wednesday, with guidance from Cirrus Logic helping to weigh down the stock. The company, which supplies audio chips for Apple's iPhone, said that it had to take an inventory charge during the March quarter. Investors and analysts alike have taken to mean that Apple's iPhone sales will disappoint.

AAPL Chart

$AAPL Chart for April 17th, 2013
Source: Yahoo! Finance

In a statement, Cirrus Logic said that the inventory charge was due to "a decreased forecast for a high volume product as the customer migrates to one of Cirrus Logic's newer components."

Cirrus Logic's stock took a hit, too, ending the day at U$18.05, down $3.36 (-15.69 percent), on volume of 14.9 million shares trading hands, seven times the average.

After Cirrus Logic's earnings report, analyst Vernon Essi of Needham & Co. issued a downgrade on the stock. He said the company had been, "aggressively building to what now looks like an optimistic customer forecast."

That's a dig at Apple, but he took the opportunity to name Apple directly, saying, "We blame Apple for losing its mobility mojo."

Shares of $AAPL closed at $402.80, down $23.44 (-5.50 percent), on triple the normal volume with 33.7 million shares trading hands. $AAPL's close is the lowest closing price in the last 15 months of trading, and it briefly dropped to $398.11 per share Wednesday afternoon, the lowest point since December of 2011.

Goldman Sachs and Bernstein Research also released research notes on Apple, telling their clients that they expect Apple to turn in worse-than-expected earnings for its own March quarter. Apple is scheduled to announce earnings on April 23rd.

It's been a little over six months since Apple has announced any new products, and the company is perceived by investors as being adrift. Despite record iPhone sales in the December quarter, the opinion that "Apple has lost its mobile mojo," as expressed by Vernon Essi, is a fairly common impression.

Which means that Cirrus Logic's comments about its own sales fits in well with the narrative that demand for Apple's iPhone is declining. Cirrus Logic isn't the only source for such stories, however, and at this point investors have plenty of reason to expect iPhone sales for the March quarter to come in below expectations.

We'll know on April 23rd, of course; how that effects Apple's stock in the meanwhile remains to be seen. Most analysts have said that a disappointing quarter has already been baked into $AAPL. Today's results suggest that's not necessarily the case.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

Comments

BurmaYank

“Shares of $AAPL closed at $402.80, down $23.44 (-5.50 percent), on triple the normal volume with 33.7 million shares trading hands. $AAPL’s close is the lowest closing price in the last 15 months of trading”
I sure hope Apple was who bought most of those shares.

Lee Dronick

Burma Yank, other people are thinking of that.

http://www.slate.com/blogs/moneybox/2013/04/17/taking_apple_private_makes_sense_but_nobody_has_the_money.html

Bosco (Brad Hutchings)

Well, BurmaYank, buying shares on a high volume day as the price plumets is arguable a better use of Apple’s cash than investing in new products or supply chain. Astute call!

CudaBoy

....unless AAPL levels off at $300. Leave it to the drones to put positive spins on bad news.

Log-in to comment