Why Power Integrations (POWI) Stock Is Plummeting Today

NEW YORK (TheStreet) -- Shares of Power Integrations Inc. (POWI) are down -27.46% to $42.38 after Sterne Agee downgraded the company's rating to "neutral" from "buy" after the company reported weaker than expected demand in computers and communications.

The firm said operating leverage for the company, which designs, develops and manufactures high voltage, analog and mixed signal integrated-circuit products and high voltage silicon diodes, "is much more of a challenge."

Power Integrations revenue grew 5% year over year versus Sterne's estimate of 14%. The firm cut its estimates for the company's 2014 second quarter to 57 cents from 68 cents per share.

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Separately, TheStreet Ratings team rates POWER INTEGRATIONS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate POWER INTEGRATIONS INC (POWI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 14.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • POWI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.26, which clearly demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 57.57% and other important driving factors, this stock has surged by 57.28% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, POWI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • POWER INTEGRATIONS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, POWER INTEGRATIONS INC turned its bottom line around by earning $1.88 versus -$1.21 in the prior year. This year, the market expects an improvement in earnings ($2.76 versus $1.88).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 65.0% when compared to the same quarter one year prior, rising from $9.72 million to $16.04 million.
  • You can view the full analysis from the report here: POWI Ratings Report
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