Shares of Cirrus Logic (CRUS -0.16%) fell 14.8% in June, according to data from S&P Global Market Intelligence. The audio chip designer received a matching pair of bullish and bearish analyst reports in the third week of June. Investors brushed off the optimistic analysis to focus on the potential downside in owning Cirrus shares.
Barclays analyst Blayne Curtis downgraded the stock from "equal weight" to "underweight," lowering his price target from $75 to $60 per share. Curtis agreed that the new design wins within the Apple (AAPL 1.56%) account that drove Cirrus shares higher in the fall of 2019 will benefit the company. He also argued that the current share price "is more than reflecting" the financial upside of providing a closed loop controller for future iPhones. Apple is also rumored to stop including wired earbuds in off-the-shelf iPhone packages this year. Cirrus shares fell as much as 11% the day the news was revealed.
Benchmark analyst Ruben Roy was quick to argue that Cirrus looked like a long-term buy after the big price drop Curtis inspired. In Roy's view, the won and lost Apple parts should balance each other out, but the new closed loop controller should eventually find new business in the Android-based segment of the smartphone market. Benchmark's buy rating and $95 target price didn't lift Cirrus' share price at all.
The Barclays report makes sense, but Benchmark's analysis focused on long-term business prospects rather than a short-term speed bump. All things considered, I agree that Cirrus looks like a solid long-term investment at just 12.6 times free cash flow and 15 times forward earnings.