Barclays Downgrades Cirrus Logic and Skyworks Solutions

Investing.com — Barclays downgraded Cirrus Logic (NASDAQ:CRUS) to Equal Weight and Skyworks Solutions (NASDAQ:SWKS) to Underweight on Thursday, citing overly optimistic handset expectations for the upcoming year.

The downgrade stems from the bank's revised content assumptions for the iPhone SE4 and iPhone 17 (IP17), expecting more modest unit growth in 2024.

Barclays analysts noted that current market anticipations for handset growth are misaligned with reality. They highlighted that the consensus expects a 10% increase in new phone units for next year, while Barclays predicts only 5% growth.

Regarding SWKS, analysts expressed skepticism about the company's potential to regain lost share in multiple-input multiple-output (MIMO) sockets, indicating that a content uplift seems unlikely. They also foresee lower unit expectations and content challenges, particularly in China, where the Android market poses increased difficulties.

Analysts believe that SWKS will encounter tough conditions over the next six months, with earnings estimates likely to fall below consensus. They project $6.42 in earnings per share for SWKS in 2024, versus the Street's estimate of $6.72.

Concerning CRUS, Barclays pointed out that although the company has been a favored stock in the handset sector, the recent rally has limited upside until there’s more clarity on content gains for the iPhone 18.

They remarked, “CY26 should be another year of strong content uplift.” However, they believe that the Street's December numbers are $20M+ too high.

Additionally, the bank stated that any benefits from the PC side will not significantly drive growth.

In summary, Barclays indicates that the growth outlook for both CRUS and SWKS is more limited than the market perceives.