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Apple supplier getting crushed

November 1, 2012: 1:50 PM ET

Investors are bailing out of Cirrus Logic (CRUS), the Apple (AAPL) supplier that just issued a strong earnings report and upbeat outlook.

So, what gives?

Well, early Thursday, Felt & Co. downgraded Cirrus' stock to hold from strong buy, citing gross margin concerns and pricing pressure headwinds. Felt analyst Jeffrey Schreiner also cut his price target on the stock by $10 to $44. He said Cirrus remain innovative over the long term but cautioned investors should 'take a breath' after the recent run-up.

Cirrus was trading around $36 on Thursday. But the stock is up a whopping 130% so far this year.

Many StockTwits traders thought the sell-off was overblown.

abubnic: $CRUS down 13.5% today despite stellar earnings report. Seems very unreasonable. Could retrace?

howardlindzon:$CRUS earnings fine, obviously some momo manager somewhere worried that $AAPL will mess with them as a supplier (long $AAPL)

The company, which makes microchips for Apple iPods, iPhones and iPads, gets 80% of its revenue from Apple so any changes to the supply chain agreement will impact Cirrus' bottom line too.

tickertutor: I'm betting $AAPL gonna get ruthless begin demanding lower ASP(s) to expand their product margins. Not good for $CRUS at this valuation.

That's exactly what Schreiner was cautioning about. But Canaccord analyst Bobby Burleson says the gross margin/pricing pressure worries are overdone. He reiterated his buy rating on Cirrus and kept a price target of $52 on the stock.

ivanhoff: It is not rare to see price to top before earnings. Remember, market is forward looking, but not always right of course $CRUS

nickgweezy:@LaMonicaBuzz @OptimistWilliam regardless, the sell-off in $CRUS is overblown. A beat and raise is a beat and raise.

Investors can be a fickle bunch. It seems like a little dose of reality is setting in. Yes, Cirrus has had a huge run-up. But maybe, just maybe, it can continue that trend.

mytfine: $CRUSanother example of loved name as late as last night that loses luster and just collapses. Tide turns quickly when algos flip to a sell

The stock has already started to claw back from steep losses as short covering appears to be kicking in.

ronin245: $CRUS finally getting small short covering bounce, took the fade last night dubl top at 45, even surprised me, $SNDK fade wasnt this good
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Catherine Tymkiw
Catherine Tymkiw
News Editor CNNMoney

Catherine Tymkiw is a news editor at CNNMoney where she helps oversee breaking news coverage and futures planning. Previously, she was the investing editor. Prior to joining CNNMoney, she was the online editor at Crain's New York Business and has nearly two decades of reporting and editing experience. She tweets @ctymkiwcnn

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