Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Cirrus Logic (NASDAQ: CRUS ) plunged more than 13% Monday after Barclays analyst Blayne Curtis reiterated his underweight rating on the stock, noting research that reveals Apple's iPad Air does not contain certain hardware components previously supplied by the company.
So what: To be sure, a recent teardown from the folks at Chipworks confirmed that audio amplifiers supplied by Cirrus in previous iPad versions aren't present in the new iPad Air, and instead have been replaced by competing amplifiers from Maxim. That doesn't bode well for Cirrus, which receives more than 80% of its revenue from Apple and had already plunged less than two weeks ago after its latest quarterly earnings report made apparent previously disclosed gross margin pressures.
Now what: Cirrus' products aren't entirely absent from Apple's new devices; it still most notably provides a common audio codec found in both the iPad Air and the iPhone 5c. As it stands, though, investors are understandably upset by any loss in revenue from Cirrus' largest customer, and made nervous by the prospect that Apple could eventually oust Cirrus from its products altogether.
Still, with the stock trading at only 10.4 times next year's earnings estimates, it appears much of that pessimism could be priced in. While there's certainly risk involved for any business so heavily reliant on a single customer, shares of Cirrus could still turn out to be a bargain for patient investors down the road.
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