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Power Integrations: Challenging Macroeconomic Environment Means That Optimism Is Fully Baked In

Investment Thesis:

With a recent pivot towards higher-growth industrial applications, Power Integrations (POWI) looks to have positioned itself well to take advantage of wider, secular trends within the power supply marketplace, which should enable it to rapidly develop its addressable market and revenue base over the next few years. The growing imposition of regulations focusing on energy efficiency play into PI's wheelhouse, as its proprietary designs are suitably flexible to allow for these modifications, and its higher-voltage integrated circuit products should see higher utilization in a variety of "green" applications that range from LED lighting to high-efficiency vehicles. Consistent improvement in operating metrics, a shift towards higher-margin and higher-growth products, and the potential for a rapid ramp-up in revenues with a scalable model suggest the potential for strong EPS growth over the next few years, but the company remains highly vulnerable to market cycles and product commoditization.

These latter factors… Read More …