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Results: Power Integrations, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates
There's been a notable change in appetite for Power Integrations, Inc. (NASDAQ:POWI) shares in the week since its quarterly report, with the stock down 10% to US$40.26. Revenues were US$125m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.32, an impressive 27% ahead of estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Power Integrations' four analysts is for revenues of US$527.3m in 2027. This would reflect a decent 16% increase on its revenue over the past 12 months. Per-share earnings are expected to bounce 54% to US$1.23. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$545.4m and earnings per share (EPS) of US$1.26 in 2027. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
View our latest analysis for Power Integrations
The consensus price target fell 15% to US$60.67, with the weaker earnings outlook clearly leading valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Power Integrations at US$65.00 per share, while the most bearish prices it at US$55.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Power Integrations' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 12% growth to the end of 2027 on an annualised basis. That is well above its historical decline of 12% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 26% annually for the foreseeable future. So although Power Integrations' revenue growth is expected to improve, it is still expected to grow slower than the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Power Integrations. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Power Integrations' future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Power Integrations going out to 2028, and you can see them free on our platform here.
You still need to take note of risks, for example - Power Integrations has 1 warning sign we think you should be aware of.
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