What Happened?
Shares of semiconductor designer Power Integrations (NASDAQ: POWI) fell 6.3% in the morning session after the company reported third-quarter earnings and issued a disappointing revenue forecast for the upcoming fourth quarter.
While its third-quarter earnings per share of $0.36 beat analyst expectations, revenue slightly missed forecasts. The main concern for investors was the company's guidance for the fourth quarter. Power Integrations projected revenues between $100 million and $105 million, which at the midpoint was 11.5% below what analysts had estimated. The company pointed to expected softness in appliances and lower industrial revenues as reasons for the weak outlook. Adding to the uncertainty, the company's CFO, Sandeep Nayyar, resigned. In response to the news, analyst firm Benchmark lowered its price target on the stock to $50 from $55, citing the disappointing guidance.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Power Integrations? Access our full analysis report here.
What Is The Market Telling Us
Power Integrations’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock dropped 4% on the news that investors reassessed stretched valuations following a period of strong gains, sparking a broad sell-off. The tech-heavy Nasdaq fell as much as 1.6%, with the S&P 500 also declining. The pullback was exemplified by AI firm Palantir Technologies, which dropped over 7% despite reporting better-than-expected sales. This negative reaction to positive news suggests investors are concerned about extreme valuations and are engaging in "long liquidation"—selling positions to lock in profits after a significant rally. Adding serious weight to this caution, leadership at both Goldman Sachs and Morgan Stanley highlighted the possibility of a correction in the equity markets over the next couple of years. Despite the euphoria driven by AI optimism and the promise of future rate cuts, these banks viewed this cooling-off period not as a disaster, but as a necessary and healthy feature of a long-term bull market.
Power Integrations is down 38.8% since the beginning of the year, and at $37.15 per share, it is trading 45.4% below its 52-week high of $68.05 from November 2024. Investors who bought $1,000 worth of Power Integrations’s shares 5 years ago would now be looking at an investment worth $560.42.
The biggest winners—Microsoft, Alphabet, Coca-Cola, Monster Beverage—were all riding powerful megatrends before Wall Street caught on. We’ve just identified an under-the-radar profitable growth stock positioned at the center of the AI boom. Get it FREE here before the crowd discovers it. GO HERE NOW.
