Cirrus Logic (NASDAQ:CRUS) shares have dropped more than 10% since its Aug. 2 first-quarter report despite the company topping Wall Street estimates. The audio-chip specialist's reliance on Apple (NASDAQ:AAPL) for the majority of its revenue turned out to be a double-edged sword.

Apple clocked better-than-expected iPhone sales in the latest quarter, which rubbed off positively on Cirrus' top line, as it gets around 76% of its revenue from its largest customer, which is presumed to be Apple. But at the same time, the uncertain production ramp-up schedule of the next-generation iPhones crushed Cirrus' hopes of issuing a sunny guidance.

Not surprisingly, Cirrus shares dropped almost 7% in post-earnings action. The stock has lost roughly 20% since since hitting a 52-week high in early June, as rumors of a delay in iPhone production have taken their toll. But does this drop in Cirrus' stock price make it a buy, or should investors brace for more downside?

A person touching the screen on a smartphone

Image source: Getty Images.

What gives?

Cirrus Logic forecasts revenue between $390 million and $430 million for the fiscal second quarter. The company's revenue will drop 4% year over year at the midpoint of that guidance range, which isn't usually expected from a major Apple supplier going into the third quarter of a calendar year, when the iPhone production ramp usually begins.

By comparison, Cirrus' September-ended quarter revenue in 2016 shot up an impressive 40% year over year as Apple decided to increase the production numbers of the 7-series iPhones. The situation is different this time, as Cupertino has reportedly been forced to delay production of next-gen iPhones by around two months thanks to supply chain issues.

But investors shouldn't press the panic button yet, because Cirrus management believes things could come out better than expected.

Don't lose hope just yet

In a letter to shareholders issued by Cirrus management, the company said:

... our customers can and frequently do change individual orders on short notice. While this generally has little to do with the health of our business, it does make predicting the Q2 and Q3 revenue split particularly challenging as we expect to be ramping heavily at this quarter boundary and small changes in timing could cause large swings in our revenue for each quarter.

The last line indicates that Cirrus is having difficulty gauging its guidance for the second and third quarters of the fiscal year thanks to Apple-related uncertainty. But the company has laid out the possibility of its second-quarter revenue turning out to be better than the guidance based on the timing of the orders.

Additionally, investors should consider that Apple's latest revenue guidance turned out to be better than Wall Street expectations. The company forecasts revenue between $49 billion and $52 billion for the quarter that ends at the end of September, ahead (at the top) of the analyst estimate that calls for a top line of $49.2 billion. Good iPhone news for Apple would be good news for Cirrus.

Attractively valued?

Cirrus Logic looks like a value play after the recent correction in its stock price. The stock currently trades at a price-to-earnings (P/E) ratio of just 15, which is cheap given its projected annual earnings growth of over 23% for the next five years. In fact, the chipmaker's current P/E multiple is lower than its 13-year median of 18.4.

Finally, investors shouldn't forget that Cirrus has been trying to diversify by focusing on emerging technologies so that it isn't so reliant on Apple and the iPhone. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.