Navitas Semiconductor Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

By
Simply Wall St
Published
May 15, 2022
NasdaqGM:NVTS
Source: Shutterstock

Shareholders might have noticed that Navitas Semiconductor Corporation (NASDAQ:NVTS) filed its quarterly result this time last week. The early response was not positive, with shares down 3.9% to US$6.67 in the past week. It was overall a positive result, with revenues beating expectations by 2.3% to hit US$6.7m. Navitas Semiconductor also reported a statutory profit of US$0.61, which was a nice improvement from the loss that the analysts were predicting. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Navitas Semiconductor

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NasdaqGM:NVTS Earnings and Revenue Growth May 15th 2022

Taking into account the latest results, the current consensus from Navitas Semiconductor's eight analysts is for revenues of US$46.3m in 2022, which would reflect a major 84% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 22% to US$0.41. Before this earnings announcement, the analysts had been modelling revenues of US$47.2m and losses of US$0.81 per share in 2022. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a considerable decrease in losses per share in particular.

The consensus price target fell 30% to US$11.75despite the forecast for smaller losses next year. It looks like the ongoing lack of profitability is starting to weigh on valuations. 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. The most optimistic Navitas Semiconductor analyst has a price target of US$22.00 per share, while the most pessimistic values it at US$9.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Navitas Semiconductor's rate of growth is expected to accelerate meaningfully, with the forecast 126% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 57% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.5% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Navitas Semiconductor is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Navitas Semiconductor's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Navitas Semiconductor. Long-term earnings power is much more important than next year's profits. We have forecasts for Navitas Semiconductor going out to 2024, and you can see them free on our platform here.

Even so, be aware that Navitas Semiconductor is showing 4 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

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