Why Power Integrations' Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of chip maker Power Integrations (Nasdaq: POWI  ) fell in early trading today, bottoming out near $34 per share before stabilizing at about a 6% loss. The company managed to beat bottom-line estimates by $0.06 per share, notching $0.49 in adjusted EPS. Revenue missed the mark, coming in at just $76.4 million versus the $81.3 million analyst consensus. Forward guidance was disappointing, as Power Integrations put third-quarter revenue estimates between $76 million and $82 million, well below the Street's expectations of $88.7 million.

So what: Power Integrations also announced a settlement with the IRS for an audit of the company's 2003 to 2006 results. This will help the company substantially reduce its tax burden in the upcoming year to "the high single digits," according to the company's earnings release. The tax benefit may well be offsetting weak guidance, lessening the sting of reduced demand in a tricky macroeconomic environment.

Now what: A P/E of 33 isn't cheap, and the company's bottom line hasn't had a lot of upward momentum in the last two years. With the tax benefit to be baked into Power Integrations' expectations, it seems like the stock may continue to drift sideways until a major catalyst appears.

Want more news and updates? Add Power Integrations to your Watchlist now.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1975679, ~/Articles/ArticleHandler.aspx, 9/20/2014 4:25:16 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 19 hours ago Sponsored by:
DOW 17,279.74 13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASD 4,579.79 -13.64 -0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/19/2014 4:00 PM
POWI $55.23 Down -1.57 -2.76%
Power Integrations… CAPS Rating: ***

Advertisement