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Sunday, Dec 3, 2023

Newport Beach’s Conexant Continues Bearish Slide

Shares of Newport Beach chipmaker Conexant Systems Inc. continued their bearish slide Friday, a day after the company gave an outlook for the current quarter that fell short of Wall Street’s expectations.

Conexant’s shares slumped 13% in afternoon New York trading on a recent market value of $120 million.

Conexant’s fourth quarter outlook “significantly underwhelmed” Street expectations, according to Rick Schafer, an analyst at Oppenheimer & Co.

The chipmaker said it’s expecting to see revenues of $45 million to $47 million, down about 14% from the fourth quarter of 2009 and short of analysts’ expectation of $53 million in sales.

Conexant didn’t give a profit outlook, but company watchers believe the revenue shortfall will plunge the company into red ink.

“With revenues dipping below $50 million per quarter, profitability will be elusive for the near-to-medium term,” Schafer said in a note to clients.

Analysts, on average, are now expecting Conexant to report $2 million in profits for the fourth quarter, down roughly 80% from the same period a year earlier.

Conexant cited an expected decline in its older product lines, inventory issues at its customers and weak demand for PCs as the primary reasons for the drop off in sales.

Analyst Schafer doesn’t see Conexant’s shares taking a beating for too long.

“The disappointing guidance is largely priced in,” he said.

He said he “remains on the sidelines” with respect to Conexant’s shares. Schafer has a “perform” rating on the stock and no price target.

“With near-term profitability elusive and management’s inability to compensate for dwindling legacy revenues, we believe investors will need a couple of quarters of solid results before revisiting shares of Conexant.”

Conexant’s chips go into multifunction office printers, digital picture frames, PC speakers and other devices.

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