The shares of Cirrus Logic (CRUS) are falling after Bank of America Merrill Lynch started coverage of the stock with an Underperform, the firm's equivalent of a sell rating. The company's growth will decelerate tremendously next year, warned the firm, which set a $50 price target on the name. Cirrus supplies audio and voice chips for mobile devices.

DECELERATION: Cirrus obtains 75%-80% of its revenue from Apple's (AAPL) iPhone, but Cirrus' revenue per iPhone may not increase after its fiscal 2018, according to Bank of America analyst Adam Gonzalez. As a result, the analyst believes that the compound annual growth rate of the company's sales and profits will decline to 4%-5% between fiscal 2017 and fiscal 2020, from 30% between fiscal 2015 and fiscal 2017.

LIMITED NEAR-TERM CATALYSTS: Cirrus is looking to enter new markets and it can "meaningfully expand" by obtaining more revenue from Android smartphones, wearables, voice biometrics and a number of other sources, the analyst stated. However, the company probably won't generate significant revenue from these new sources for at least two to three years. In the meantime, the R&D costs needed to support them will limit Cirrus' profit growth, warned Gonzalez.

RISK/REWARD: Cirrus' risk/reward ratio is negative, as the stock will gain 17% versus Friday's close to $68 in a bullish scenario for the company, but the shares will plunge 46% in a bearish scenario, Gonzalez wrote.

PRICE ACTION: In morning trading, Cirrus fell 2.5% to $56.42 per share.