Navitas Semiconductor Corp Designs Chips of the Future

Semiconductor stocks have taken a beating in 2022. This was driven by supply chain disruptions and demand concerns. The immediate term for semiconductor stocks will likely continue to be volatile, but there are strong tailwinds for the long term as various countries ramp up their domestic production of microchips.

Take the case of Navitas Semiconductor Corp (NASDAQ:NVTS), which is based in Ireland.

The company develops semiconductor power chips that use gallium nitride (GaN) instead of the current silicon material. Research shows that the smaller GaN chips generate higher power output and speed, as well as charge more quickly. (Source: “What is GAN Semiconductor Technology, and How Does It Work?,” Vyrian Inc., February 2, 2022)

This could be game-changing for the semiconductor industry. The super-high speed of GaN chips will likely drive the adoption of the technology.

The global GaN semiconductor device market was valued at $1.9 billion in 2021, and that could rise at a compound annual growth rate (CAGR) of 24.4% from 2022 to 2030. (Source: “Gallium Nitride Semiconductor Devices Market,” Grand View Research, Inc., last accessed October 31, 2022.)

That's good news for companies like Navitas Semiconductor Corp.

NVTS Stock Compelling After Recent Selling

Navitas Semiconductor stock has significantly underperformed, compared to the SPDR S&P Semiconductor ETF (NYSEARCA:XSD). NVTS stock is down by 75% this year, which is about twice as bad as the SPDR S&P Semiconductor ETF's 37% decline in the same period.

Shares of Navitas Semiconductor Corp have been in a downward channel since their record post-initial-public-offering (IPO) high in November 2021.

Chart courtesy of StockCharts.com

The selling of Navitas Semiconductor stock was made worse after the emergence of a bearish death cross pattern in March, which saw a fall of another 50%. A death cross occurs when the 50-day moving average (MA) breaks below the 200-day MA.

I view Navitas Semiconductor Corp's share-price weakness as an aggressive opportunity.

A positive sign was NVTS stock's significant rally back above its 50-day MA after breaking below channel support in July. Navitas Semiconductor stock jumped to $8.10 on August 16, above channel resistance.

NVTS stock failed to hold the breakout, and has subsequently fallen back by 48% to near its previous low, which was in July.

Chart courtesy of StockCharts.com

Shares of Navitas Semiconductor Corp are eyeing key support at $3.50 to $4.00 after failing to hold their 50-day MA of $5.35. Above Navitas Semiconductor stock's 200-day MA is a resistance level at $8.00 to $11.00, representing a move as high as 175%. Even if NVTS stock were to recover to $11.00, it would be well below its high of $22.00.

Analyst Take

While Navitas Semiconductor stock's current technical picture is bearish, its severe price deterioration presents a high-risk/high-reward opportunity. Shares of Navitas Semiconductor Corp could move toward their key moving averages, which could result in a gain of 70%.

Company insiders own 37.5% of the outstanding Navitas Semiconductor stock and have bought 15.3 million shares over the last six months. (Source: “Navitas Semiconductor Corporation (NVTS),” Yahoo! Finance, last accessed October 31, 2022.)

I suggest taking the current semiconductor stock price weakness as an opportunity to consider shares of beaten-down Navitas Semiconductor stock. Navitas Semiconductor Corp's success will depend on the successful adoption of GaN chip technology.