Communications chip-maker Conexant Systems Inc. saw its shares tumble Monday in heavy trading after an analyst, citing concerns that the company is facing increased competition, downgraded the stock.
The stock fell $18.81 a share, or 16%, to $96.81, as more than 13 million shares changed hands, about triple the average daily volume over the last three months.
Analyst Rick Billy with SG Cowen downgraded Conexant to a “buy” from a “strong buy” and cut his earnings expectations to $1.03 a share from $1.08 a share for the next fiscal year.
In the report, Billy noted that the Newport Beach company’s Network Access and Wireless divisions, which accounted for at least 63% of the company’s growth in the last year, are now encountering serious competition.
The company is “superbly run” and is expected to meet these challenges, “but the risk is undoubtedly heightened,” he added.
These competitors include Altera Corp. in San Jose, QLogic Corp. in Costa Mesa and Integrated Device Technology in Santa Clara.
Analysts say that the Conexant downgrade wasn’t unexpected, given the stock’s sharp run-up in such a short period of time.
The stock surged to a 52-week high of $132.50 a share earlier this month, bolstered by news of several key acquisitions and new product announcements. Even after the slump Monday, the shares are up nearly 46% so far this year.
All 15 analysts who track the stock rate Conexant either a “buy” or a “strong buy,” according to a First Call/Thomson Financial survey.
“We try not to focus on the share price day to day,” said company spokesman Tom Stites. “Instead, we’re running the business and staying focused on growth opportunities.”
In its first fiscal quarter this year, Conexant earned $51.8 million, or 24 cents a share, on revenues of $510 million. Analysts expect the company to post earnings of 19 cents a share in the second quarter and 87 cents a share for the current fiscal year ending Sept. 30.
Also on Monday, Conexant unveiled a series of new products and technologies. They include a single-chip modem that provides Internet access for hand-held computers and video-game machines, and a technology that will boost the power source used in cell phones, which could triple the amount of time users can talk.