Power Integrations (NASDAQ:POWI) Misses Q4 Analysts' Revenue Estimates

Adam Hejl /
2023/02/06 4:11 pm EST
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Semiconductor designer Power Integrations (NASDAQ:POWI) missed analyst expectations in Q4 FY2022 quarter, with revenue down 27.7% year on year to $124.7 million. Power Integrations made a GAAP profit of $22.8 million, down on its profit of $40.7 million, in the same quarter last year.

Is now the time to buy Power Integrations? Access our full analysis of the earnings results here, it's free.

Power Integrations (POWI) Q4 FY2022 Highlights:

  • Revenue: $124.7 million vs analyst estimates of $125.5 million (0.62% miss)
  • EPS (non-GAAP): $0.48 vs analyst estimates of $0.46 (4.72% beat)
  • Revenue guidance for Q1 2023 is $105 million at the midpoint, below analyst estimates of $126.6 million
  • Free cash flow of $18.3 million, down 58.6% from previous quarter
  • Inventory Days Outstanding: 215, up from 160 previous quarter
  • Gross Margin (GAAP): 53.9%, in line with same quarter last year

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.

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 solid, averaging 18.5% annually. Last year the quarterly revenue declined from $172.6 million to $124.7 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 Total Revenue

This was a difficult quarter for Power Integrations, with revenue declining 27.7%, missing analyst estimates by 0.62%.

Power Integrations's revenue growth has decelerated for the last three quarters and the company expects growth to turn negative next quarter guiding to a 42.3% year on year decline, while analysts are estimating a NTM revenue decline of 0.38%.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business 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.

Power Integrations Inventory Days Outstanding

This quarter, Power Integrations’s inventory days came in at 215, 75 days above the five year average, suggesting that that inventory has grown to higher levels than what we used to see in the past.

Key Takeaways from Power Integrations's Q4 Results

With a market capitalization of $5.12 billion Power Integrations is among smaller companies, but its more than $353.8 million in cash and positive free cash flow over the last twelve months give us confidence that Power Integrations has the resources it needs to pursue a high growth business strategy.

We liked to see that Power Integrations beat analysts’ earnings expectations pretty strongly this quarter. That feature of these results really stood out as a positive. On the other hand, it was less good to see that the revenue growth was quite weak and the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results could have been better. The company is down 4.43% on the results and currently trades at $84 per share.

Power Integrations may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.