Will Cypress break that negative trend this week? The company, which specializes in programmable system-on-a-chip packages (particularly the kind used for controlling touchscreen displays), reports first-quarter results before the market opens on Thursday.
Wall Street analysts are nothing but doom and gloom this time. Earnings are expected to drop nearly 60% year over year to $0.10 per share on $185 million in sales -- a 21% plunge. That's in line with new guidance from Cypress, revised at the middle of the quarter.
The original management guidance pointed to sales of at least $200 million, even as CFO Brad Buss expected a very thin order flow this quarter. The new weakness stems from slow orders in "certain wireline and handset customers" on top of weak order flows through third-party chip distributors.
Cypress didn't have much luck in the touchscreen market in 2011. The company scored wins for Research In Motion's
Cypress chips did manage the touchscreen in the minuscule Apple
So you can see why the Street has turned sour on Cypress even though the stock scores a perfect five-star score in our CAPS system. I got my bullish CAPScall in early enough to score some solid points on Cypress, but I'm getting nervous about this pick. Unless Cypress proves to me that Q1 really is the bottom of this demand cycle, I'm prepared to close my CAPS position this week. If this company can't compete for an exploding trillion-dollar market, plenty of other chip suppliers stand ready to pick up the slack.