Last Update 18 Feb 26

Fair value Increased 1.19%

POWI: Rising Revenue And Margin Confidence Will Support Future Upside

Analysts have nudged their price target on Power Integrations higher to $51.0 from $50.4, citing updated assumptions for revenue growth, profit margins, and a lower required return on the shares, which is reflected in a revised future P/E outlook.

Analyst Commentary

Recent research updates on Power Integrations frame the higher price target as a reflection of refreshed views on growth, profitability, and the valuation investors may be willing to pay for the shares.

Bullish Takeaways

Bullish analysts link the higher target to updated revenue growth assumptions, suggesting they see the company as able to support a stronger top line than previously modeled.
Revisions to profit margin expectations point to confidence that the business can convert revenue into earnings efficiently, which feeds directly into their earnings and P/E assumptions.
The lower required return on the shares signals that these analysts view the risk profile as acceptable for investors at current levels. This supports a higher valuation in their models.
The revised future P/E outlook implies that bullish analysts think investors may continue to ascribe a solid earnings multiple to Power Integrations if the company executes on its revenue and margin plans.

Bearish Takeaways

Bearish analysts may question whether the updated revenue assumptions are achievable, especially if end market demand or customer spending turns out to be more restrained than models imply.
There can be concern that higher margin expectations leave less room for error, since any cost pressure or pricing headwind could weigh on earnings relative to the current forecasts.
A lower required return embeds the view that risk is manageable. More cautious analysts might argue that this leaves limited valuation cushion if sentiment or earnings assumptions are revised.
The reliance on a revised future P/E outlook means that if growth or execution falls short of the modeled path, the valuation case for the higher target could weaken quickly.

What's in the News

Reduction in force of approximately 7% of the global workforce approved on February 1, 2026, with estimated severance and benefits costs of US$3.5 million to US$4.0 million expected to be recognized in the first quarter of 2026, and completion targeted by the end of that quarter (Key Developments).
New earnings guidance for the first quarter of 2026, with revenue expected in a range of US$104 million to US$109 million (Key Developments).
Cash dividend of US$0.215 per share announced, payable on March 31, 2026, to stockholders of record as of February 27, 2026 (Key Developments).
Amended and restated bylaws effective January 27, 2026, updating shareholder nomination and meeting procedures, forum selection provisions, and indemnification language to align with Delaware law and universal proxy rules (Key Developments).
Removed from the S&P 400 and its Information Technology sector index and added to the S&P 600 and its Information Technology sector index (Key Developments).

Valuation Changes

Fair Value: $51.0 vs $50.4, indicating a small upward revision to the target level used in the model.
Discount Rate: 10.41% vs 10.48%, reflecting a slight reduction in the required return applied to future cash flows.
$ Revenue Growth: 12.85% vs 10.70%, representing a higher growth assumption built into the updated estimates.
Net Profit Margin: 23.07% vs 13.45%, indicating a meaningfully higher margin assumption in the new scenario.
Future P/E: 24.74x vs 41.80x, showing a significantly lower multiple assumed for the shares in the updated model.

Leadership in high-voltage GaN technology and ongoing product innovation enables market share gains and improved margins in high-growth, energy-efficient sectors.
Strategic geographic expansion and operational efficiency create a resilient, diversified business with stronger long-term revenue and profitability prospects.
Heavy reliance on consumer appliances, trade headwinds, slow entry into new growth areas, and heightened competition threaten long-term growth, margin resilience, and earnings visibility.

Catalysts

About Power Integrations

Designs, develops, manufactures, and markets analog and mixed-signal integrated circuits (ICs), and other electronic components and circuitry used in high-voltage power conversion.What are the underlying business or industry changes driving this perspective?

Growing adoption of advanced power conversion technologies in EVs, AI data centers, renewable energy, and modern power grids is expected to drive long-term expansion of Power Integrations' addressable market, supporting sustained revenue growth over time.
Power Integrations' proprietary high-voltage GaN technology (currently unmatched at 1250V and 1700V) positions the company to capture premium share in emerging high-density, high-efficiency end-markets such as next-gen AI data centers and automotive, which is likely to boost both average selling prices and gross margins.
Ongoing product innovation, especially the integration of digital control and development of disruptive, system-level ICs/modules, enables further market share gains, design wins, and higher-margin business as demand shifts toward energy-efficient solutions in appliances, metering, and industrial automation, positively impacting overall earnings and net margins.
Strategic expansion in geographies with secular infrastructure build-outs (e.g., smart meters in India, metering in Japan and Europe, and automotive globally) provides diversified revenue streams and a more resilient business mix, mitigating short-term volatility and supporting operating leverage.
Commitment to operational efficiency and enhanced R&D productivity under new CEO leadership aims to accelerate time-to-market for new products and capture growth in high-value sectors, improving both revenue growth and long-term profitability.

Power Integrations Earnings and Revenue Growth

Power Integrations Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Power Integrations's revenue will grow by 12.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 7.6% today to 15.3% in 3 years time.
Analysts expect earnings to reach $96.7 million (and earnings per share of $1.73) by about September 2028, up from $33.6 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 44.3x on those 2028 earnings, down from 74.6x today. This future PE is greater than the current PE for the US Semiconductor industry at 33.5x.
Analysts expect the number of shares outstanding to decline by 1.35% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.96%, as per the Simply Wall St company report.

Power Integrations Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company is currently experiencing significant near-term headwinds due to tariffs and global trade uncertainty (especially in appliances), and ongoing exposure to tariff escalations or protectionist policies could dampen international sales growth, increase operational costs, and reduce revenue visibility over the long term.
Power Integrations' core business remains highly concentrated in consumer appliances (~50% of consumer revenues), which face cyclical sensitivity to housing markets and macroeconomic factors; long-term stagnant demand or prolonged inventory corrections could compress both revenue and margins in these foundational markets.
While the company has proprietary high-voltage GaN technology and is making progress in emerging segments like automotive and AI data centers, it is not yet on approved vendor lists for critical customers (e.g., NVIDIA), which limits the speed and certainty of penetration; failure to secure or scale major design wins may delay or constrain revenue and earnings growth in these high-potential end markets.
Industry competitive risks remain elevated from lower-cost Asian rivals and alternative power management technologies (e.g., silicon carbide, commoditized MOSFETs), which could erode Power Integrations' pricing power and gross margins, especially in mainstream applications as the industry shifts toward higher efficiency standards and broader adoption of next-generation architectures.
Execution risk in new product development and end-market diversification is meaningful: challenges in efficiently scaling R&D, adapting internal processes for more complex automotive/data center markets, or delays in bringing differentiated products to volume may result in slower innovation cycles, lost market share, and below-target long-term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $60.8 for Power Integrations based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $70.0, and the most bearish reporting a price target of just $55.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $634.3 million, earnings will come to $96.7 million, and it would be trading on a PE ratio of 44.3x, assuming you use a discount rate of 10.0%.
Given the current share price of $44.67, the analyst price target of $60.8 is 26.5% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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