Barclays Downgrades Cirrus Logic and Skyworks Solutions
Recently, Barclays issued downgrades for Cirrus Logic (NASDAQ: CRUS) and Skyworks Solutions (NASDAQ: SWKS), reflecting concerns that the anticipated growth in the handset market might be overly optimistic. Analysts at Barclays labeled Cirrus Logic as Equal Weight and Skyworks Solutions as Underweight.
Revised Expectations for Handset Market
The bank's decision stems from adjusted expectations regarding the forthcoming iPhone models, specifically the iPhone SE4 and iPhone 17. Barclays predicts a more reserved growth rate for mobile devices in 2024 compared to the broader market assumptions.
While the consensus forecast anticipates a 10% rise in new phone units next year, Barclays believes that only a 5% increase is realistic, suggesting a growing disconnect between market predictions and actual potential outcomes.
Skyworks' Market Challenges
Skyworks Solutions faces significant challenges in regaining market share, especially in the competitive domain of multiple-input multiple-output (MIMO) sockets. This concern raises doubts about the company's ability to see an uplift in content for their products, a crucial aspect of growth in the ever-evolving device landscape.
Moreover, with the Android market facing hurdles, especially in regions like China, Barclays foresees harder conditions for Skyworks in the upcoming months. Their predictions indicate a fall in earnings estimates, projecting earnings per share at $6.42 for SWKS in 2024. This is notably lower than the Street's figure of $6.72, reflecting a more cautious outlook.
Cirrus Logic's Clarity Challenges
For Cirrus Logic, analysts have historically viewed the company as a strong player within the handset sector. However, the recent surge in stock price appears to have left limited upward potential until clearer insights are gained regarding content increases for the iPhone 18 emerge.
According to Barclays, they anticipate that the year 2026 will bring a notable boost in content offerings, but until then, they caution against overestimating growth prospects. They recommend reevaluating December projections, suggesting they might be inflated by over $20 million.
Growth Prospects for Both Companies
In summary, Barclays posits that the growth trajectories for both Cirrus Logic and Skyworks Solutions are likely to be more restrictive than current market assumptions might suggest. With evolving technologies and ever-changing consumer preferences, both companies will need to navigate significant market dynamics to meet revised expectations and maintain competitiveness.
Frequently Asked Questions
Why did Barclays downgrade Cirrus Logic and Skyworks Solutions?
Barclays downgraded both companies due to concerns about overly optimistic handset growth expectations and a potential disconnect between market assumptions and reality.
What specific models influenced Barclays' downgrade decision?
The downgrade was influenced by revised expectations for the upcoming iPhone SE4 and iPhone 17 models, leading to more modest growth forecasts.
How does Skyworks Solutions plan to address market challenges?
Skyworks is working to regain market share, particularly in MIMO sockets, but faces significant challenges in a competitive landscape.
What earnings projections did Barclays set for Skyworks Solutions?
Barclays forecasts earnings per share of $6.42 for Skyworks in 2024, which is lower than the market's estimate of $6.72.
What are the expectations for Cirrus Logic's future content gains?
Barclays anticipates strong content increases for Cirrus Logic in 2026 but warns that current stock waves may have inflated immediate growth expectations.
