What happened
Shares of Navitas Semiconductor (NVTS 0.24%) -- one of the smaller semiconductor companies and a specialist in making chips used to power electronic devices -- were up 16.4% as of 10:20 a.m. ET Tuesday. The move higher came after the business exceeded expectations in its first-quarter 2023 earnings report and promised more of the same.
Analysts had low hopes for Navitas heading into Q1, predicting it would lose $0.08 per share on $12.3 million in revenue. The company cleared both of those low bars, however, reporting only a $0.07-per-share non-GAAP loss and sales of $13.4 million.
So what
First-quarter 2023 revenue literally doubled in comparison to the year-ago period, but not all of Navitas' results were so encouraging. Gross profit margin on that revenue, for example, declined by 3 full percentage points to 41%. Navitas cut spending on selling, general, and administrative expenses, but increased its spending on research and development.
That's not necessarily a bad thing. Still, heavy spending on such operational costs pushed Navitas into the red from a profits perspective, with negative operating earnings of $35.5 million for the quarter, and a $0.39-per-share GAAP loss on the bottom line. (Note that the $0.07-per-share loss was a pro forma figure.)
Now what
So the good news about Navitas is that sales growth is strong and likely to get stronger. Management noted that its backlog of orders grew 50% in the quarter, that Q2 revenue will range from $16 million to $17 million (which is ahead of analyst predictions), and that full-year revenue will be twice what the company collected in 2022 -- so about $76 million, with gross profit margin rising in tandem.
The bad news, however, is that when CEO Gene Sheridan says Navitas has a "$760 million customer pipeline," well, that's probably not quite as optimistic a prediction as what investors may think it is. It would appear to refer more to contracts that Navitas may potentially win, rather than to an actual backlog of contracts already won.
Meanwhile, Navitas isn't promising profits, is still reporting losses, and is expected to keep reporting losses for as far out as analysts are making forecasts for the company -- so at least through 2026. Investors seem to think that's all worth a 16% boost to Navitas' share price today.
I disagree.
