Bearish: Analysts Just Cut Their Power Integrations, Inc. (NASDAQ:POWI) Revenue and EPS estimates
The analysts covering Power Integrations, Inc. (NASDAQ:POWI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the six analysts covering Power Integrations provided consensus estimates of US$548m revenue in 2023, which would reflect a chunky 16% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to nosedive 48% to US$1.56 in the same period. Before this latest update, the analysts had been forecasting revenues of US$620m and earnings per share (EPS) of US$2.19 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.
View our latest analysis for Power Integrations
The average price target climbed 9.6% to US$86.00 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Power Integrations at US$100.00 per share, while the most bearish prices it at US$66.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 16% by the end of 2023. This indicates a significant reduction from annual growth of 13% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 8.3% per year. It's pretty clear that Power Integrations' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Power Integrations. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Power Integrations' revenues are expected to grow slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Power Integrations.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Power Integrations' financials, such as recent substantial insider selling. For more information, you can click here to discover this and the 1 other concern we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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