Investment Idea: Power Integrations, Inc.

Power Integrations, Inc. designs, develops, manufactures, and markets analog and mixed-signal integrated circuits (ICs), and other electronic components and circuitry used in high-voltage power conversion worldwide. The company provides a range of alternating current to direct current power conversion products that address power supply ranging from less than one watt of output to approximately 500 watts of output for mobile-device chargers, consumer appliances, utility meters, LCD monitors, main and standby power supplies for desktop computers and TVs, LED lighting, and various other consumer and industrial applications, as well as power conversion in high-power applications comprising industrial motors, solar and wind-power systems, electric vehicles, and high-voltage DC transmission systems. It also offers high-voltage diodes; high-voltage gate-driver products used to operate high-voltage switches, such as insulated-gate bipolar transistors and silicon-carbide MOSFETs under the SCALE and SCALE-2 product-family names; and SCALE-iDriver for use in powertrain and charging applications for electric vehicles. In addition, the company provides motor-driver ICs for use in refrigerator compressors, ceiling fans, and air purifiers, as well as pumps, fans, and blowers used in consumer appliances, such as dishwashers and laundry machines. It serves communications, computer, consumer, and industrial markets. The company sells its products to original equipment manufacturers and merchant power supply manufacturers through direct sales force, as well as a network of independent sales representatives and distributors. Power Integrations, Inc. was incorporated in 1988 and is headquartered in San Jose, California.

Investment Idea: Power Integrations, Inc. (POWI)

Power Integrations, Inc. (POWI): Investment Idea

Price: $37.72 Market Cap: $2.1B

1. Executive Summary

Power Integrations (POWI) presents a compelling investment opportunity driven by its leadership in high-voltage power conversion and its expanding presence in high-growth markets like electric vehicles (EVs) and industrial automation. The company's innovative SCALE-iDriver technology and strong financial profile position it for significant revenue growth and margin expansion.

2. Investment Thesis

Our bull case for Power Integrations rests on the following pillars:

Growth in Electric Vehicles: POWI's SCALE-iDriver product family is poised to benefit significantly from the rapidly expanding EV market. The company's high-voltage gate-driver ICs are critical components in EV powertrain and charging systems. As EV adoption accelerates and charging infrastructure expands, demand for SCALE-iDriver products will likely increase, driving substantial revenue growth for POWI.
Industrial Automation & Motor Control Tailwinds: The ongoing trend towards industrial automation, coupled with increasing energy efficiency mandates, will further boost POWI's motor-driver IC business. These ICs are used in energy-efficient appliances and industrial equipment, creating a durable demand base. The shift towards higher efficiency in appliances (refrigerators, fans) and industrial motors presents a structural growth driver.
Strong Intellectual Property and Technological Leadership: POWI boasts a significant intellectual property portfolio and a strong reputation for innovation in high-voltage power conversion. This allows them to maintain a competitive edge and command premium pricing. Their commitment to developing cutting-edge solutions like those based on silicon carbide (SiC) MOSFETs for demanding applications strengthens their competitive position.
Disciplined Capital Allocation and Financial Strength: POWI has a track record of prudent capital allocation, including share repurchases and dividend payments. Their strong balance sheet provides flexibility to invest in R&D and potentially pursue strategic acquisitions to further expand their product offerings and market reach. The company’s historically high gross margins relative to peers is indicative of their strong pricing power and product differentiation.

Investment Idea: Power Integrations, Inc.

Investment Idea: Power Integrations, Inc. (POWI)

Power Integrations, Inc. (POWI): Investment Idea

POWI Valuation Model