Power Integrations (POWI) AI Stock Analysis

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Power Integrations

(NASDAQ:POWI)

55Neutral

Power Integrations faces significant challenges with declining revenue and profitability, despite a robust balance sheet. Technical indicators suggest bearish market trends, and a high P/E ratio points to potential overvaluation. Positive future growth expectations from the earnings call provide some optimism, but inventory management issues and segment-specific declines temper the outlook.

Positive Factors

GaN Adoption

GaN adoption is accelerating, with strong demand across the portfolio, particularly for its new 1700V solution.

Growth Opportunities

The company is well positioned for growth across its key end markets, all guided to grow in 2025.

Negative Factors

Demand Weakness

Power Integrations reported generally in-line results but significantly worse guidance as management called out a weak demand environment, particularly in appliances.

Outlook Concerns

The outlook is disappointing, driven entirely by the appliance market on enthusiastic customer inventory builds, anticipating stimulus actions in China to spur demand.

Power Integrations (POWI) vs. S&P 500 (SPY)

Market Cap

$2.85B

Dividend Yield1.74%

Average Volume (3M)614.52K

Price to Earnings (P/E)89.0

Beta (1Y)1.62

Revenue Growth-5.75%

EPS Growth-41.75%

CountryUS

Employees865

SectorTechnology

Sector Strength57

IndustrySemiconductors

Share Statistics

EPS (TTM)0.56

Shares Outstanding56,847,070

10 Day Avg. Volume546,195

30 Day Avg. Volume614,521

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)7.46

Price to Cash Flow (P/CF)53.00

P/FCF Ratio66.90

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$76.25

Price Target Upside50.45% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering4

Power Integrations Business Overview & Revenue Model

Company DescriptionPower Integrations, Inc. is a leading innovator in semiconductor technologies for high-voltage power conversion. Based in San Jose, California, the company specializes in developing and manufacturing cutting-edge integrated circuits (ICs) that are pivotal in efficient energy conversion for a wide array of applications, including consumer electronics, industrial systems, and renewable energy sources. Power Integrations' products are known for enhancing energy efficiency, minimizing electronic waste, and reducing carbon footprints, aligning with global sustainability efforts.

How the Company Makes MoneyPower Integrations generates revenue primarily through the sale of its proprietary integrated circuits and related components, which are essential in various power conversion applications. The company's key revenue streams include the consumer electronics sector, where its products are used in devices such as smartphones, appliances, and LED lighting. Additionally, the industrial sector contributes significantly to its earnings, with applications in motor controls and power supplies. Power Integrations also benefits from strategic partnerships with electronics manufacturers and technology firms that integrate its solutions into their products, thereby expanding its market reach and driving sales growth. Innovative product development and a strong patent portfolio further reinforce its competitive edge and financial performance.

Power Integrations Financial Statement Overview

Summary

Power Integrations exhibits a strong balance sheet with no debt and high equity levels, indicating financial health. However, the decline in revenue and profitability poses challenges. Cash flow remains solid, but negative free cash flow growth could limit expansion opportunities.

Income Statement

Positive

The income statement shows a decline in total revenue from $651 million in 2022 to $419 million in 2024, indicating a negative revenue growth trend. The gross profit margin for 2024 is approximately 53.6%, which is relatively healthy for the industry. However, the net profit margin dropped from 26.3% in 2022 to 7.7% in 2024, reflecting reduced profitability. EBIT and EBITDA margins also decreased significantly, suggesting operational challenges and reduced earnings efficiency.

Balance Sheet

Positive

The balance sheet remains strong with a debt-free position in 2024, enhancing financial stability. The equity ratio is high at approximately 90.5%, indicating a solid capital structure with low leverage. Return on equity has declined from 22.6% in 2022 to 4.3% in 2024, highlighting a decrease in shareholder returns. Overall, the company's balance sheet demonstrates financial resilience despite pressures on profitability.

Cash Flow

Positive

Cash flow metrics indicate a mixed performance. Operating cash flow increased from $65.8 million in 2023 to $81.2 million in 2024, showing improved cash generation from operations. Free cash flow to net income ratio is robust, suggesting effective cash conversion. However, free cash flow growth has been negative when compared to the previous periods, which could impact future investment capabilities. The operating cash flow to net income ratio is strong, indicating efficient cash management despite declining net income.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
418.97M	444.54M	651.14M	703.28M	488.32M
	Gross Profit
224.75M	228.96M	366.91M	360.64M	243.59M
	EBIT
17.93M	35.06M	180.41M	175.06M	70.49M
	EBITDA
17.93M	72.44M	217.76M	210.01M	98.59M
	Net Income Common Stockholders
32.23M	55.73M	170.85M	164.41M	71.18M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
300.00M	311.57M	353.81M	530.35M	449.19M
	Total Assets
828.83M	819.87M	840.10M	1.01B	903.34M
	Total Debt
0.00	9.98M	8.73M	11.42M	10.03M
	Net Debt
-50.97M	-53.95M	-96.65M	-146.70M	-248.85M
	Total Liabilities
79.05M	67.63M	84.88M	102.45M	92.93M
	Stockholders Equity
749.77M	752.24M	755.22M	912.03M	810.41M
Cash Flow		Free Cash Flow
63.90M	44.88M	176.13M	183.60M	55.04M
	Operating Cash Flow
81.18M	65.76M	215.34M	230.87M	125.64M
	Investing Cash Flow
-25.92M	-14.15M	78.34M	-232.80M	-28.27M
	Financing Cash Flow
-68.22M	-93.05M	-346.42M	-98.83M	-17.19M

Power Integrations Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price50.68

Price Trends

50DMA

54.49

Negative

100DMA

58.35

Negative

200DMA

61.28

Negative

Market Momentum

MACD

-2.07

Negative

RSI

52.26

Neutral

STOCH

77.10

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For POWI, the sentiment is Neutral. The current price of 50.68 is above the 20-day moving average (MA) of 47.12, below the 50-day MA of 54.49, and below the 200-day MA of 61.28, indicating a neutral trend. The MACD of -2.07 indicates Negative momentum. The RSI at 52.26 is Neutral, neither overbought nor oversold. The STOCH value of 77.10 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for POWI.

Power Integrations Risk Analysis

Power Integrations disclosed 26 risk factors in its most recent earnings report. Power Integrations reported the most risks in the “Tech & Innovation” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Power Integrations Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
HIMX	63 Neutral	$1.19B	15.19	9.11%	4.05%	-4.43%	57.01%
Sector *	59 Neutral	$10.74B	10.21	-6.69%	3.04%	7.44%	-10.92%
POWI	55 Neutral	$2.85B	88.96	4.29%	1.74%	-5.75%	-41.75%
SLAB	52 Neutral	$3.37B	―	-16.69%	―	-25.29%	-449.44%
SITM	52 Neutral	$3.08B	―	-13.30%	―	40.77%	-11.80%
SMTC	51 Neutral	$2.54B	―	-137.83%	―	4.66%	84.78%
KLIC	50 Neutral	$1.71B	270.27	0.31%	2.53%	-4.92%	-85.39%

* Technology Sector Average

Performance Comparison

POWI

Power Integrations

50.68

-15.76

-23.72%

HIMX

Himax Technologies

7.08

2.21

45.38%

KLIC

Kulicke & Soffa

32.08

-14.06

-30.47%

SMTC

Semtech

30.03

-5.74

-16.05%

SLAB

Silicon Laboratories

102.76

-19.37

-15.86%

SITM

SiTime Corporation

153.04

64.25

72.36%

Power Integrations Earnings Call Summary

Earnings Call Date: Feb 6, 2025 | % Change Since: -16.29% | Next Earnings Date: May 12, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture, with strong growth in several key segments and promising future prospects, particularly with GaN technology and expansion in India. However, the company faced significant challenges in the communications segment and inventory management, leading to a balanced view of the company's current position.

Highlights

Revenue Growth in Key Segments

Revenues were up 18% year over year to $105 million, with consumer up more than 35%, computer more than 10%, and industrial up about 3%. Despite an overall decline for the year, these segments showed strong growth.

Successful GaN Adoption and Industry Recognition

GaN-based products are expected to grow at a high rate and exceed 10% of sales. The 1700-volt Innomax 2 ICs received multiple industry awards, highlighting the company's leadership in GaN technology.

Expansion in India

Power Integrations has expanded its presence in India, securing significant shares in metering and fixed wireless rollouts, and supplying gate drivers for electric locomotives.

Positive Outlook for 2025

The company expects revenue growth in all four segments, driven by industrial growth due to infrastructure projects and increasing demand in air conditioning and TV markets.

Lowlights

Significant Revenue Decline in Communications

The communications category fell more than 60% following the exit from the China OEM cell phone business. This decline significantly impacted overall revenue performance.

Q4 Sequential Revenue Decrease

Revenues were down 9% sequentially in Q4. Consumer revenues were down mid-teens sequentially, and industrial revenues were down 10%, largely driven by the timing of shipments for metering applications.

Inventory Challenges

Inventory days rose to 315 at quarter-end, up 24 days from the prior quarter, reflecting the sequentially lower revenues. Inventory remains well above target levels.

Company Guidance

During the Power Integrations, Inc. Q4 earnings call, guidance for 2025 indicated expectations of sustained revenue growth across all segments, with a notable emphasis on the industrial sector, which is projected to lead growth driven by infrastructure projects such as high voltage DC transmission, renewables, and electric locomotives. The company expects Q1 revenue to be flat sequentially, with a full-year gross margin of around 55.5%. There is an anticipated 15% year-over-year revenue increase for Q1. Key growth drivers include the adoption of GaN technology, anticipated to exceed 10% of sales, and increased market presence in India. The automotive sector is also expected to grow rapidly from a modest base, further supported by new design wins and expansions into markets outside of China.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.