Silicon has been the industry standard among microchips since the late 1950s. Navitas Semiconductor (NVTS 6.46%) is trying to disrupt the status quo. The company is developing advanced semiconductors using gallium nitride (GaN) for low and medium-voltage applications, and silicon carbide (SiC) for high-voltage uses.
The goal is to achieve an efficiency upgrade, with more advanced materials and technology-enabling semiconductors that are more powerful while consuming less energy.
But Navitas Semiconductor is struggling from a business standpoint. Its revenue has declined since mid-2024, and its cash losses are almost as significant as its top line. Is Navitas Semiconductor a stock headed for $0? Or is there more here?
A stable foundation despite revenue declines
It goes without saying that Navitas Semiconductor is an early-stage business with just $56 million in revenue over the past four quarters. After all, the company is barely a decade old. Admittedly, it is not ideal that trailing 12-month sales have declined from nearly $100 million in mid-2024.
Image source: Getty Images.
However, this was somewhat intentional. Management pulled away from specific opportunities in China, including consumer and mobile applications with very low profit margins. In a sense, this is prudent for a company that is still burning cash.
Meanwhile, the business has very little debt, just $7.1 million. And despite a free cash flow loss of $47 million over the past year, Navitas Semiconductor still has $150 million in cash on its balance sheet, enough to fund the company for three more years at that rate.
Is the stock headed to $0?
NASDAQ: NVTS
Key Data Points
If it does, it's unlikely to happen anytime soon.
To be clear, Navitas Semiconductor is a risky stock. This young company is essentially resetting its business, with a new CEO at the helm. Navitas Semiconductor anticipates that revenue will continue to decline as it transitions to more attractive opportunities in data centers and other high-power applications.
Wall Street analysts currently estimate that revenue will end the current fiscal year at approximately $45 million and decline to $36 million the following year. Fortunately, Navitas Semiconductor is well-funded, and if it can endure this shift, the future looks promising.
Nvidia has recognized Navitas Semiconductor as a partner for its next-generation 800V DC architecture in AI factory computing. It's a great opportunity as artificial intelligence (AI)'s continuously rising energy and performance requirements could compel the technology sector to embrace new hardware materials and methods in the pursuit of efficiency.
So no, the stock probably isn't a zero. If investors can tolerate the sizable risks in the stock today, it could be a big winner over the next five years and beyond as technological innovation demands more advanced semiconductors.
