By Teresa Rivas
In a note out today Barclays’ analyst Blayne Curtis reiterated his Underweight rating on the stock, writing that he had identified four Maxim MAX98304 Class D Amplifiers in the iPad Air, meaning that Cirrus’s products are no longer being used for the tablet’s amplifier socket. It still uses Cirrus’s audio CODEC.
The stock was falling earlier today on the rumors, as the company depends on Apple for about 80% of sales.
Curtis writes that the news is a “clear negative” for Cirrus: “While the CODEC is likely still secure given the high level of custom content, there has always been a potential for displacement of CRUS’ amplifiers as these chips are largely a commodity. The iPad Air is admittedly only a portion of total iPad sales, but we believe CRUS likely lost the socket in the retina mini as well, and this also points to the potential loss of the amplifier sockets in future iPads (potential launch in spring) and the IP6 (fall ’14). Assuming just the iPad air and the retina mini, we estimate a loss of roughly $30-40M in annual revenue next year (~5% of revenue; assumes $1 ASP for 2 amps). Furthermore, we believe there is potential for AAPL’s entire product line to move away from CRUS amps over the coming year, which would imply a total revenue drop of $150M+ annually (20%+ of rev; assumes $0.50 ASP in iPhones and $1 ASP in iPads).”
While he left his $16 price target untouched, Curtis did trim revenue and EPS estimates through calendar year 2015. See details of his initial October downgrade of the stock here.