Cirrus Logic

mwaheedf

I invested in this company just before earnings. it was at 38 and went down to 30. The earnings were a beat so was the future guidance. The beating didn't make sense. I am fairly a novice and investing with a small amount that i can afford to lose to learn the trade. But would love for someone to explain why this was the case...

sb78

mwaheedf wrote: »

I invested in this company just before earnings. it was at 38 and went down to 30. The earnings were a beat so was the future guidance. The beating didn't make sense. I am fairly a novice and investing with a small amount that i can afford to lose to learn the trade. But would love for someone to explain why this was the case...

Hi,
although both the recent earnings and guidance were both a beat, the company mentioned falling profit margins in their report. It seems in these these time that any slight negative from a company's earnings gets severely punished, though I think it was way overdone, with a lot of it driven by high frequency trading (computer algorithms etc.).
Also, this stock is tied to Apple, as Apple is far and away Cirrus' largest customer. Any news out of Apple will drive Cirrus' stock price. So when Apple stock price is falling, that's bad news for Cirrus.
Also, you have investors selling their shares ahead of potential tax changes in the U.S for next year (fiscal cliff),
Add in the fact that the stock market was weak in the past few weeks.
However, not all bad news as Cirrus announced recently a share re-purchase scheme and also some analyst have upgraded the stock. Most analysts have a price target of over $50 (see yahoo finance, though not sure how accurate that is) on this one so the stock has started to re-trace a bit

mwaheedf

sb78 wrote: »

Hi,
although both the recent earnings and guidance were both a beat, the company mentioned falling profit margins in their report. It seems in these these time that any slight negative from a company's earnings gets severely punished, though I think it was way overdone, with a lot of it driven by high frequency trading (computer algorithms etc.).
Also, this stock is tied to Apple, as Apple is far and away Cirrus' largest customer. Any news out of Apple will drive Cirrus' stock price. So when Apple stock price is falling, that's bad news for Cirrus.
Also, you have investors selling their shares ahead of potential tax changes in the U.S for next year (fiscal cliff),
Add in the fact that the stock market was weak in the past few weeks.
However, not all bad news as Cirrus announced recently a share re-purchase scheme and also some analyst have upgraded the stock. Most analysts have a price target of over $50 (see yahoo finance, though not sure how accurate that is) on this one so the stock has started to re-trace a bit

yeah I noticed the margin, to be honest I expected the margin to be SLIGHTLY lower anyway. If i was selling 100 phones to a customer and then he wanted 200 naturally he will get more of a discount because he is buying more. Maybe I am looking at this too simply. Just frustrating because I was completely right and couldn't understand the price movement that followed.

The stock market and apple getting battered definitely contributed. Hopefully the next few months will see a recovery in both stocks.

sometimes I think apple might as well take over the company as it pretty much most the revenue for cirrus (80% I believe)

Thanks for the reply and clarification.

sb78

no problem, you weren't the only one puzzled at the price movement