Power Integrations' Revenue Re-Acceleration Looking More Like A 2019 Event

All you need to be a successful semiconductor loved by investors is perpetual double-digit revenue growth, 60%-plus gross margins, 30%-plus operating margins, a rich buyback, expanding end-markets, and optionality on both ends of the M&A spectrum. See? Simple.

Sarcasm aside, Power Integrations (POWI) has been in a tougher spot recently, with the company missing a few times on the top line and lowering guidance. A slowdown in smartphones and communications and delays in other programs has pushed revenue growth down from the double-digits, and the margins remain sub-optimal. Add in a relatively robust valuation, and I’m not too surprised that the shares have lagged the SOX by a significant degree since my last update, not to mention underperforming peers/rivals like ON Semiconductor (ON). With the shares already pricing in a return to double-digit revenue and a mid-20%’s operating margin, it’s tough for me to see a compelling risk-adjusted opportunity here.

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Power Integrations' Revenue Re-Acceleration Looking More Like A 2019 Event