We came across a bullish thesis on Navitas Semiconductor Corporation (NVTS) on Twitter by Shay Boloor. In this article, we will summarize the bulls’ thesis on NVTS. Navitas Semiconductor Corporation (NVTS)’s share was trading at $3.43 as of Jan 8th. NVTS’s trailing P/E was 13.24 respectively according to Yahoo Finance.
A factory line of robotic arms assembling gallium nitride Field Effect Transistors (FETs).
During Q3, while sentiment around Navitas reached its lowest point, the company was seen by some investors as struggling, with its stock price dropping to the low $2 range. However, despite these concerns, Navitas demonstrated significant resilience, with its core strengths as a leader in gallium nitride (GaN) technology becoming increasingly apparent. Although its revenue dipped 2% year-over-year, the company made notable strides in operational efficiency, increasing gross margins to 40%, up from 32% last year. This was achieved even as Navitas continued to ramp up investments in research and development (R&D) and sales, general, and administrative (SG&A) expenses. These improvements in margins showcased the company’s ability to weather temporary headwinds, such as delayed EV projects and seasonal market softness, while continuing to position itself for long-term growth.
Navitas also made substantial progress in Q3 by securing 72 new design wins across critical markets, including electric vehicles (EVs), mobile applications, appliances, solar energy, and AI data centers. These new opportunities contributed to an expanding pipeline now valued at over $1.6 billion, a notable increase from $1.2 billion just a year ago. This expansion is a clear indication of the growing adoption of GaN technology across various sectors, with Navitas at the forefront of meeting that demand. As hyperscalers, EV platforms, and solar energy systems continue to integrate GaN into their designs, Navitas’ solutions are poised to become indispensable.
A key milestone during the quarter was the introduction of Navitas’ 48-volt GaN platform. This innovative product is tailored to meet the needs of hyperscalers and OEMs transitioning to more energy-efficient power systems, unlocking a $1 billion market opportunity. The 48-volt system, which reduces energy loss by at least 25%, positions Navitas as a leader in this critical shift towards greater energy efficiency. The company’s partnership with Infineon further strengthens its competitive position, providing dual-sourcing options that mitigate adoption risks and build customer confidence in the technology.
To enhance profitability, Navitas is also shifting its focus toward the most lucrative segments of its business, including AI data centers, EVs, and mobile applications. Additionally, the company is executing a cost reduction strategy, including a 14% workforce reduction expected to save $2 million per quarter starting in 2025. This streamlined approach positions Navitas for greater profitability while maximizing its ability to capitalize on high-growth markets.
Despite risks such as reliance on Chinese markets and the challenges of scaling GaN adoption, Navitas remains in a strong financial position, with $99 million in cash and no debt, providing ample runway for its growth strategy. With its stock price already showing signs of a rerating, Navitas is still viewed by many as undervalued, with significant upside potential as the company continues to execute on its growth plan.
Navitas Semiconductor Corporation (NVTS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 8 hedge fund portfolios held NVTS at the end of the third quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of NVTS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVTS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.