Vicor Shares are Down Over 15% Year-to-Date: Is This a Buying Opportunity?

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Written By Marcus Reynolds

Vicor Corporation, based just outside of Boston, specializes in manufacturing modular power components and power systems for electrical power conversion. The company also provides complementary components such as AC-DC converters, AC-line rectifiers, brick format DC-DC converters, and custom power solutions.

Its primary customers include OEMs and contract manufacturers in industries such as defense and aerospace. Vicor’s stock trades around $34.00 per share, with a market capitalization of approximately $1.5 billion.

Recent Financial Results

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On April 23rd, Vicor Corporation reported its first-quarter financial results. The company achieved GAAP earnings of six cents per share, with revenues falling by over 14% year-over-year to $83.9 million. While bottom-line results met expectations, sales were slightly below forecasts. Net income dropped to $2.6 million from $11.2 million in the same period a year ago.

A notable concern from the earnings report was the significant decline in operating cash flow. Vicor generated only $2.7 million in operational cash flow during the quarter, a sharp decrease from $22.1 million in the fourth quarter of 2023 and $10.1 million in the first quarter of the previous year.

The increase in legal expenses by $4 million from the prior quarter, primarily due to costs incurred ahead of a trial in the company’s long-standing patent infringement case before the ITC, contributed to this decline. A court decision in this case is expected in late summer or early fall of this year.

Additionally, the order backlog dropped significantly to $150.3 million from over $271 million in the first quarter of 2023 and $160.8 million in the fourth quarter of 2023.

Positive Aspects

Despite these challenges, Vicor’s top and bottom-line results were close to consensus estimates, unlike the fourth quarter, where the company missed both earnings and sales expectations.

In the first quarter, Vicor achieved net income of $8.7 million and $0.19 per diluted share, surpassing the first-quarter performance.

Analyst Reaction and Balance Sheet

The analyst community does not foresee an immediate turnaround for Vicor Corporation. Both Craig-Hallum and Needham reissued Hold ratings following the first-quarter results. Insiders have also not shown significant buying interest in the stock, with only one minimal insider purchase in August of the previous year and no substantial insider buying in recent years.

Vicor Corporation ended the first quarter with nearly $240 million in cash and marketable securities and no long-term debt, according to the company’s 10-Q filing for the quarter. This strong cash position is one of the few current positives for Vicor’s investment case.

In the previous fiscal year, Vicor Corporation earned $1.19 per share on $405 million in sales. The current analyst consensus projects a significant drop in profits to just under 50 cents per share in FY2024, with sales expected to fall to just under $335 million.

However, analysts anticipate a profit rebound to nearly a dollar per share in FY2025, with sales growth in the low teens.

Falling Sales and Order Backlog is a Concern

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Furthermore, recent analysis suggests Vicor’s potential as an important component supplier to the AI industry. Additionally, management expressed optimism about the company’s opportunities in the electric vehicle space during the first-quarter conference call. Despite this optimism, the current reality shows falling sales, earnings, and order backlog.

Even with Vicor Corporation’s stock price having more than halved over the past year, the stock remains expensive at 30 times trailing earnings, given the projected declines in earnings and revenues for this fiscal year.


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