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On Wednesday, TD Cowen adjusted its outlook on Power Integrations (NASDAQ:POWI), a semiconductor company, by reducing its price target from the previous $80.00 to $70.00, while retaining a Hold rating on the stock. The firm's decision comes in response to the company's guidance for sequential growth in the upcoming June and September quarters, following a trough in the March quarter.
The analyst from TD Cowen acknowledged that Power Integrations had managed to overcome some important, albeit low, hurdles, as indicated by the forecasted growth after a challenging March quarter. The guidance suggests a modest recovery trajectory for the company, which aligns with the performance of many of its peers in the semiconductor industry.
Despite the sequential growth, the analyst pointed out that demand remains weak, which has made the recovery slope difficult to predict. This ongoing weakness in demand is occurring even as inventory levels are becoming more stable. One positive note from the analyst's observations is that foreign exchange volatility has not significantly impacted the company's performance so far.
However, the broader macroeconomic environment continues to pose challenges for Power Integrations. These conditions have influenced the analyst's decision to maintain the Hold rating on the stock and adjust the price target downward to reflect the current market situation.
The new price target of $70.00 set by TD Cowen reflects a more cautious valuation of Power Integrations, acknowledging both the incremental progress in the company's performance and the persistent headwinds facing the industry at large.
In other recent news, Power Integrations has been making notable strides in its operations. The company reported a Q1 revenue of $92 million and non-GAAP earnings of $0.18 per share, with expectations of a rise in gross margin and a Q2 revenue forecast of around $105 million. It also highlighted a decrease in channel inventories and an improvement in bookings. In an effort to expand its product range, Power Integrations has announced the release of its SCALE-iFlex XLT family of dual-channel gate drivers for inverter applications.
These new drivers are designed to enhance the operation of various single semiconductor modules and are expected to increase converter power by 25 to 30 percent. Power Integrations is also set to bolster its foray into high-current GaN technology with the acquisition of assets from Odyssey Semiconductor. These recent developments indicate the company's commitment to innovation and market expansion.
InvestingPro Insights
In light of TD Cowen's revised price target for Power Integrations (NASDAQ:POWI), it's worthwhile to consider additional insights from InvestingPro. Power Integrations has shown a commitment to shareholder returns, as evidenced by an 11-year streak of dividend increases—an InvestingPro Tip that highlights the company's financial discipline and stability. Moreover, the company's balance sheet strength is underlined by it holding more cash than debt, providing a cushion against market volatility.
From an InvestingPro Data perspective, Power Integrations' market capitalization stands at $3.5 billion, with a high P/E ratio of 81.18, signaling a premium valuation by the market. Despite a notable revenue decline of nearly 19.75% over the last twelve months as of Q2 2024, the company maintains a robust gross profit margin of 52.43%. Additionally, the stock's recent performance has seen a significant drop, with a 1-week total return of -12.01%, which may attract investors looking for potential entry points near the 52-week low.
For readers interested in a deeper dive, there are 12 additional InvestingPro Tips available for Power Integrations at https://www.investing.com/pro/POWI, offering more nuanced perspectives on the company's financial health and market position.
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