Tuesday, Needham maintained its Buy rating on Navitas Semiconductor (NASDAQ: NVTS) shares but reduced the price target to $4.00 from $5.00. The adjustment follows the company's announcement of third-quarter results for 2024, which aligned with expectations but failed to meet its own guidance for the fourth consecutive time. Navitas attributed this shortfall to broader market challenges in the Industrial and Solar sectors and delays in multi-million dollar contracts.
The semiconductor company, known for its work with Gallium Nitride (GaN) technology, remains a focus for Needham despite the guidance miss. Navitas recently launched a new low-voltage GaN product aimed at DC/DC converters and entered a strategic partnership with Infineon (OTC:IFNNY) for dual sourcing, signaling potential growth in its market presence.
In response to the current challenges, Navitas has initiated a cost reduction strategy that is expected to decrease operating expenses by approximately $2 million each quarter. This move is part of a broader plan to accelerate the company's path to profitability amid the current economic climate affecting its business.
Needham has revised its revenue projections for Navitas downward, but the anticipated reduction in operating expenses is believed to help mitigate the impact on the firm's non-GAAP earnings per share (EPS) forecast. The new 12-month price target of $4.00 reflects an enterprise value that is 5 times Needham's adjusted calendar year 2026 sales estimate of $140 million for Navitas Semiconductor.
In other recent news, Navitas Semiconductor recorded a Q3 revenue of $21.7 million, driven by peak GaN shipments, despite an operational loss of $12.7 million. The company has maintained a strong financial status with $99 million in cash and no debt.
Looking ahead, Navitas expects Q4 revenues to range between $18 million and $20 million. The financial services firm Baird has adjusted its outlook on Navitas, lowering the price target to $5.00 from the previous $7.00, but maintaining an Outperform rating. Baird projects a revenue rebound for Navitas in the second half of 2025, with gross margins expected to grow further.
The company has also announced a strategic partnership with Infineon and plans to reduce its workforce by 14% to decrease operating expenses. These are among the recent developments at Navitas Semiconductor.
InvestingPro Insights
Recent InvestingPro data provides additional context to Navitas Semiconductor's current situation. The company's market capitalization stands at $478.82 million, with a revenue of $91.68 million for the last twelve months as of Q2 2024. Despite a strong revenue growth of 69.74% over the same period, Navitas is currently not profitable, with an adjusted operating income of -$118.15 million.
InvestingPro Tips highlight some key aspects of Navitas's financial position. The company holds more cash than debt on its balance sheet, which could provide some financial flexibility as it navigates current challenges. However, the stock has taken a significant hit, falling 43.87% over the past six months and 57.7% over the last year, reflecting investor concerns about the company's performance.
These insights align with Needham's analysis, particularly regarding the need for cost reduction strategies to improve profitability. The InvestingPro Fair Value of $3.34 and the analyst fair value target of $5.00 suggest potential upside from the current price of $2.61, though investors should consider the company's volatile stock movements and profitability challenges.
For readers interested in a deeper analysis, InvestingPro offers 11 additional tips for Navitas Semiconductor, providing a more comprehensive view of the company's financial health and market position.
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