Power Integrations (NASDAQ:POWI) Misses Q4 Analysts' Revenue Estimates
Semiconductor designer Power Integrations (NASDAQ:POWI) missed analysts' expectations in Q4 FY2023, with revenue down 28.3% year on year to $89.51 million. Next quarter's revenue guidance of $90 million also underwhelmed, coming in 5.2% below analysts' estimates. It made a non-GAAP profit of $0.22 per share, down from its profit of $0.48 per share in the same quarter last year.
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Power Integrations (POWI) Q4 FY2023 Highlights:
Revenue: $89.51 million vs analyst estimates of $90.15 million (0.7% miss)
EPS (non-GAAP): $0.22 vs analyst estimates of $0.15 (48.4% beat)
Revenue Guidance for Q1 2024 is $90 million at the midpoint, below analyst estimates of $94.95 million
Free Cash Flow of $10.12 million, down 47.3% from the previous quarter
Inventory Days Outstanding: 343, up from 230 in the previous quarter
Gross Margin (GAAP): 51.6%, down from 54% in the same quarter last year
Market Capitalization: $4.31 billion
A leading supplier of parts for electronics such as home appliances, Power Integrations (NASDAQ:POWI) is a semiconductor designer and developer specializing in products used for high-voltage power conversion.
Analog Semiconductors
Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales Growth
Power Integrations's revenue growth over the last three years has been unimpressive, averaging 2.7% annually. This quarter, its revenue declined from $124.8 million in the same quarter last year to $89.51 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
Power Integrations had a difficult quarter as revenue dropped 28.3% year on year, missing analysts' estimates by 0.7%. This could mean that the current downcycle is deepening.
Power Integrations may be headed for an upturn. Although the company is guiding for a year-on-year revenue decline of 15.3% next quarter, analysts are expecting revenue to grow 6.1% over the next 12 months.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Power Integrations's DIO came in at 343, which is 177 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Power Integrations's Q4 Results
We were impressed by how significantly Power Integrations blew past analysts' EPS expectations this quarter. That stood out as a positive in these results. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its operating margin shrunk. Overall, the results could have been better. The stock is flat after reporting and currently trades at $78.29 per share.
Power Integrations may not have had the best quarter, but does that create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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