Power Integrations (POWI) Stock Forecast & Price Target

Power Integrations Inc is projected to achieve a 6% year-over-year revenue increase, with an anticipated resolution to the tariff-driven inventory challenges by the end of the year, positioning the company for robust growth in the upcoming year. The company is experiencing a favorable shift toward high-value end markets, such as grid modernization and high-voltage direct current transmission, which is expected to drive incremental gross-margin expansion and enhance operating leverage. Additionally, a strong demand from sectors like data centers, industrial, and automotive is expected to foster better revenue linearity and significant growth opportunities, further supporting the company’s profitability and market position.

Power Integrations Inc is facing a challenging financial outlook, with gross margin expected to decline by 130 basis points to 53.8% due to increasing input costs and less favorable product mix, alongside a modest increase in operating expenses to approximately $47 million. The company's revenue guidance for the fourth quarter stands at $102.5 million, significantly below the consensus estimate of $116 million, indicative of ongoing inventory digestion in the appliance market and a noted decline in year-over-year computer segment revenues. Furthermore, investment risks are amplified by uncertainties surrounding the COVID-19 pandemic, potential supplier issues stemming from a fabless model, and the likelihood of reduced demand in key consumer markets, which collectively hinder visibility and growth prospects.