Navitas Semiconductor (NVTS Quick QuoteNVTS - Free Report) shares have plunged 77.9% year to date (YTD), underperforming the broader Zacks Computer and Technology sector’s return of 25.7%.

Over the same time frame, it has also underperformed the Zacks Electronics- Semiconductors industry and its competitors like Broadcom (AVGO Quick QuoteAVGO - Free Report) , Astera Labs (ALAB Quick QuoteALAB - Free Report) and Cirrus Logic (CRUS Quick QuoteCRUS - Free Report) . On a YTD basis, shares of AVGO, ALAB and CRUS have returned 47.7%, 39.4% and 21.1%, respectively. The industry appreciated 32.1% in the same time frame.

This underperformance has left many investors questioning the path forward for the innovative semiconductor company specializing in gallium nitride (GaN) and silicon carbide (SiC) solutions.

Let’s take a closer look at why the stock has faced such pressure and why it might present a compelling buying opportunity now.

Reasons Behind NVTS Stock’s YTD Decline

The significant drop in NVTS’ share price can primarily be attributed to two factors: revenue weakness and slower-than-expected progress toward profitability. While the company has made strategic moves to expand its market reach and improve its product portfolio, these efforts have yet to translate into substantial revenue gains.

In the third quarter of 2024, Navitas Semiconductor reported revenues that fell short of the Zacks Consensus Estimate, triggering concerns among investors about the company's ability to sustain growth in a competitive semiconductor landscape.

Moreover, Navitas Semiconductor has been grappling with ongoing net losses, despite its efforts to cut costs. The company implemented a 14% reduction in workforce, aiming to save $2 million per quarter. However, this move has not yet proven sufficient to assure the market of its pathway to profitability. These challenges have cast doubt on the near-term financial health of the company, contributing to the stock’s steep decline.

Is Everything So Gloomy for Navitas Semiconductor?

Despite these headwinds, Navitas Semiconductor’s growth story remains intact, supported by strong tailwinds in both near-term and long-term horizons. The semiconductor company’s strategic focus on high-growth markets, such as artificial intelligence (AI) data centers and electric vehicles (EVs) positions it well for a rebound.

NVTS’ leadership in GaN and SiC technologies is a cornerstone of its growth strategy. GaN semiconductors are known for their superior efficiency and high-speed switching capabilities, which make them ideal for power-intensive applications in the AI and EV markets.

During the third-quarter earnings call, the company emphasized its significant progress in expanding its customer base and securing new design wins. These achievements highlight NVTS’ ability to capture market share as the adoption of GaN and SiC continues to grow.

Moreover, Navitas Semiconductor’s dual-sourcing agreement with Infineon is an example of NVTS’ efforts to bolster its supply chain and reduce production risks. This strategic partnership not only strengthens NVTS’ competitive edge but also ensures that it can meet growing demand as more industries shift toward energy-efficient semiconductor solutions.

NVTS is also capitalizing on the rapid advancements in AI and data center technology, which require high-performance power solutions. The increasing investment in AI-driven infrastructure is set to boost demand for the company’s advanced chips. In the EV space, Navitas Semiconductor’s technology is well-suited to support the electrification trends in the automotive and industrial sectors, ensuring a solid growth trajectory in the coming years.

Portfolio Expansion to Aid NVTS’ Prospects

Navitas Semiconductor is expected to benefit from its recent product launches. The recent launch of the world’s first 8.5 kW power supply unit (PSU) in November 2024, powered by GaN and SiC technologies to achieve 98% efficiency for next-generation AI and hyperscale data centers, might bode well for NVTS’ prospects.

NVTS achieves an important milestone in October 2024 with the introduction of GaNSlim, a new generation of highly-integrated GaN power ICs to ease and speed the development of small form factor, high-power-density applications by offering the highest level of integration and thermal performance.

In July 2024, the release of its 4.5 kW AI data center power supply reference design, with optimized GaNSafe and G3F SiC power components, is a plus. This optimized design facilitates the world’s highest power density with 137 W/in3 and more than 97% efficiency.

In August 2024, NVTS further extended its G3F 650 V SiC MOSFETs portfolio into a thermally enhanced, rugged, high-speed and surface-mount Transistor Outline Leadless package designed for demanding, high-power and high-reliability applications. This might be beneficial for NVTS stock.

Navitas Semiconductor’s Attractive Valuation

From a valuation standpoint, Navitas currently trades at a price-to-sales (P/S) multiple of 3.79X, which is well below the industry average of 5.83X. This discount provides an entry point for value-seeking investors who believe in the long-term potential of the GaN and SiC markets.

While near-term revenue pressures may persist, the low P/S ratio suggests that the market has already priced in much of the downside risk, creating an attractive opportunity for investors.

Conclusion: Buy NVTS Stock for Now

While Navitas has faced substantial challenges in 2024, including weaker-than-expected revenues and delayed profitability, its future remains promising. The company’s strategic positioning in high-growth sectors, such as AI and EVs, coupled with a discounted valuation, presents a compelling case for buying the stock now.

For investors willing to look beyond the current turbulence, Navitas Semiconductor’s innovative technology and market opportunities offer significant upside potential. 

NVTS currently carries a Zacks Rank #2 (Buy), implying that investors should accumulate the stock now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.