*** Bought Power Integrations (NASDAQ: POWI $12) ***
Sent this out to my e-mail list last week.
Cheers,
Rex
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*** Bought Power Integrations (NASDAQ: POWI $12) ***
This is my 2nd largest holding now.
Power Integrations (POWI) is a fabless IC company which makes power semiconductors. They have a unique product that allows off-the-wall power supplies to be much smaller, lighter, maybe less expensive, and draw less power when off. A combination of modern high frequency switch-mode power supply design applied to the wall socket supply.
This market is absolutely huge, in the many 100s of millions per year potentially. I just counted three of these supplies in my bedroom alone! (1) portable CD player wall adapter, (2) answering machine power supply, and (3) my cell phone charger wall supply. These are those bulky black supplies that connect to the wall and convert the wall socket 120VAC to some low DC voltage like 5V, 9V, or 12V. They usually are the same size and weight as an orange. You may now see these supplies much smaller and lighter from companies that use POWI technology.
1. Revenues should explode since the market is huge.
2. Products released last year using this technology have made an impact in the market, attracting consumer manufacturers to these ICs for new products this year.
3. Competition will heat up in a year or so, but not now.
4. They have over 20 patents and are attacking MOT already. Legal defense will be key to maintaining the competitive edge. If their patents hold and competition is stopped, the profits can be huge.
5. Only large companies with design talent will try to compete since the technology involves a process technology edge. They worked with their Asian fab to integrate MOSFET power switches which withstand 700V along with digital switch-mode controller logic on the same die.
6. I haven't seen anything like this coming from Asian IC companies. But I would expect many Asian customers.
7. Strong Wall Street coverage from NBMontgomery (Douglas Lee) should allow quick price appreciation on continuing growth of revs and earnings. But POWI is not a Wall Street darling yet, to my advantage.
The stock trades at an instantaneous P/E of 18.7 while I would expect growth to be over 50%.
My price target for this is over $30 in 6 to 24 months.
Rex
Comments and suggestions are welcome! |
