What happened
Shares of Cirrus Logic (CRUS +0.31%) have plunged today, down by 12% as of 1:10 p.m. EDT, as the broader market has tanked and set off a 15-minute circuit breaker that halts trading. The drop came shortly after a Street analyst recommended that investors buy Cirrus Logic.
So what
Cowen upgraded Cirrus Logic earlier this week to outperform while maintaining a price target of $88. Analyst Matthew Ramsay believes the company will enjoy expanded content in forthcoming Apple (AAPL +0.41%) iPhones. The Cupertino tech giant is Cirrus Logic's primary customer, representing 83% of revenue last quarter. Apple is expected to include 5G in its flagship iPhones this year, and Ramsay believes that Cirrus Logic will be a key beneficiary from the sales cycle.
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"The Covid-19 sell-off presents a window for investors to step in ahead of a multiyear content story at Apple," the analyst wrote in a research note to investors on Monday.
Now what
Last month, Apple warned that it would miss its revenue guidance due to the coronavirus, but extreme measures taken by the Chinese government to contain the outbreak within China are proving successful. That is allowing the supply chains of major tech companies to slowly resume operations. The pandemic will undoubtedly hurt iPhone demand in the next couple of quarters but Ramsey believes those issues will be "transient" and short-term in nature.
"With Cirrus' 75%+ exposure to Apple, any further deterioration in near-term builds has the potential to significantly affect results," Ramsay added. "However, we believe new content gains in future phones are not affected."
