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Cirrus Logic Leads Nasdaq Lower, But Why Is Tesla Rising?

By Dan Caplinger - Apr 30, 2021 at 2:42PM

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On a bad day for the market, the electric vehicle giant was able to defy the skeptics.

The stock market has done extremely well in April, but Wall Street looks like it's ready for a bit of a break. The Nasdaq Composite (^IXIC 0.00%) has made a run toward record highs this week, and investors seem optimistic about its long-term future. Nevertheless, the index gave up nearly 1% as of 2 p.m. EDT Friday afternoon in a broader-based market sell-off.

One problem Nasdaq stocks are having is that earnings announcements are leading to pullbacks even when numbers are reasonably solid. That happened to Cirrus Logic (CRUS -3.97%) in the wake of its fiscal fourth-quarter financial report. However, Tesla (TSLA 1.24%) defied the downturn with notable gains Friday afternoon for the electric car stock.

Cirrus gets cloudy

Shares of Cirrus Logic plunged more than 15% on Friday afternoon. The maker of components for popular smartphones wasn't able to satisfy its investors with its quarterly results.

Cirrus Logic's numbers were somewhat mixed. Sales growth was tepid at just 5% for the quarter, concluding a year in which revenue gained less than 7%. Net income for the quarter rose roughly 150%, and fiscal 2021 brought bottom-line gains of 36% compared to fiscal 2020 levels. However, on an adjusted basis, Cirrus Logic's earnings fell year over year and also trailed what most investors were hoping to see.

What seemed to worry investors most were Cirrus Logic's constraints in getting necessary supplies to boost its output and meet high demand. Those constraints affected fiscal fourth-quarter results and will also have an impact on the current first quarter of fiscal 2022 as well.

Cirrus has largely succeeded with its strategic goals, having boosted its market share in the Android smartphone market and diversified its product portfolio to avoid overreliance on any one particular customer. Nevertheless, shortages are presenting challenges that Cirrus will have to work hard to overcome if it wants to take full advantage of the growth opportunity it has now.

Blue Tesla Model S sedan on a road with the sun setting behind.

Image source: Tesla.

Tesla drives higher

Meanwhile, Tesla shares were up almost 5% in afternoon trading, easily making the electric vehicle giant the leader among top Nasdaq stocks. After a strong start to 2021 for Tesla, investors are trying to figure out just how lucrative the year could be.

In its earnings report earlier this week, Tesla repeated its 50% target for vehicle unit growth in 2021, which would imply total deliveries of around 750,000. Yet increasingly, those following the stock have much higher expectations than that. Some analysts looking at supply chain dynamics suggest that Tesla could even make a run at delivering 1 million vehicles in 2021, which would double 2020's total.

Others pointed to the company's filing with the U.S. Securities and Exchange Commission, in which Tesla said it was "probable" that revenue would reach $55 billion in 2021. That would represent a big jump compared to the first-quarter annualized run rate of just $42 billion.

Since hitting $900 per share early in 2021, Tesla's stock has been volatile but remains considerably below its best levels. Investors will simply have to wait and see whether the vehicle giant can keep executing as well on its business strategy as it has in the past. It'll take good execution to have the stock motor higher from current levels.

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Stocks Mentioned

Cirrus Logic, Inc. Stock Quote
Cirrus Logic, Inc.
$69.66 (-3.97%) $-2.88
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,028.74 (0.00%) $0.00
Tesla, Inc. Stock Quote
Tesla, Inc.
$681.79 (1.24%) $8.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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