Why Navitas Semiconductor Stock Is Plummeting Today

Navitas Semiconductor (NASDAQ: NVTS) is experiencing a significant decline in its stock price today. As of 2:15 p.m. ET, the stock is down by 19.4%, having hit a low of 21.8% earlier in the trading session.

Yesterday, after the market closed, Navitas released its fourth-quarter financial results, which were disappointing and did not meet analysts' expectations. Additionally, there is a broader trend affecting technology and artificial intelligence (AI) stocks, as many investors are pulling back on these sectors due to macroeconomic challenges and various negative influences.

Weak Q4 Results and Future Outlook

For the fourth quarter, Navitas reported a loss of $0.21 per share, with revenues totaling $18 million. This performance fell short of Wall Street's expectations, which had anticipated a loss of $0.14 per share on sales of about $19 million. Year-over-year, the company saw a 31% drop in revenue, while its operating loss grew to $39 million, compared to a loss of $26.8 million during the same quarter last year.

Looking ahead, Navitas is forecasting revenues for the first quarter to be between $13 million and $15 million, indicating yet another decline in sales. However, there is a positive note, as management has projected a gross margin of approximately 38%, a significant increase from the 12.4% gross margin reported in Q4 and the 34.4% for the previous year.

Valuation Challenges in the Tech Sector

In addition to its disappointing results and outlook, external factors are also contributing to the decline in Navitas's stock price. The technology sector is facing increased valuation pressures, especially concerning inflation worries, anticipated new tariffs, and reports suggesting that the Trump administration may intensify export restrictions on semiconductors and chip manufacturing equipment.

There is also a noted apprehension among investors regarding potential disappointing fourth-quarter results from Nvidia, a major customer for Navitas, which supplies components for Nvidia's high-end processors. Given Navitas's recent underperformance, many investors are concerned that Nvidia's report could result in further stock volatility.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

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