Vicor Corporation

VICR Details

Vicor Corporation (NASDAQ: VICR) manufactures and sells power components and systems for converting electrical power to be used in electrically powered products. The company operates in two segments: 1) Brick Products, which includes a wide range of integrated power converters with multiple conversion stages, and 2) Advanced Products, comprising newly developed products based on the company's patented Factorized Power Architecture (FPA), a unique power distribution architecture that enables the power system design employing individual components to execute particular conversion functions.

Autonomous Security Robot Developer Chooses Vicor: Knightscope Inc, an advanced security technology company, stated on April 15, 2021, that it has chosen VICR's technology to utilize the high-performance power modules for its forthcoming 5th generation Autonomous Security Robots (ASRs). In addition, Knightscope stated that Vicor's high-density, high-performance power modules are a perfect fit for Knightscope, which is focused on developing industry-leading robots.

6MFY21 Results: The company reported a 37.27% rise in net revenue to USD 184.17 million during 6MFY21 (ended June 30, 2021) compared to USD 134.16 million during 6MFY20, primarily due to strong demand and improved manufacturing efficiencies in Q2FY21. VICR reported a significant increase in net income to USD 34.48 million during 6MFY21 vs. USD 0.94 million during 6MFY20. As of June 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 230.23 million with no outstanding debt.

Key Risks: While the company has a global and broad customer base, its strategic focus is on bigger, high-volume clients. Hence, sales from its Advanced Products segment are concentrated among few big clients. In FY20 and FY19, VICR's top client accounted for around 24.1% and 14.3% of trade accounts receivable, respectively. The loss of this top client (or other important clients) may harm the company's financial situation in the long run.

Outlook: VICR had capital expenditure commitments for manufacturing equipment of about USD 11.46 million as of March 31, 2021. Additionally, it intends to use USD 38.0 million in FY21 to build a 90,000 sq. ft manufacturing facility and for new equipment installations. In its Q2FY21 Release, VICR stated that it is on its way to execute and complete its plans for vertical integration of power packaging process and facility expansions by Q1FY22, which would result in a lower factory cycle time, higher operational efficiency, and improved profitability margins in FY22.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VICR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: VICR stock price has surged 47.08% in the past 12 months and is currently trading at the higher band of the 52-weeks range of USD 70.90 to USD 111.00. The stock is currently much higher than its 50 and 200 DMA levels, and its RSI Index is 58.87. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 96.27. Considering the significant increase in the stock price, latest developments, strong margins, associated risks, and current valuation, we recommend a “Sell” rating on the stock at the current price of USD 107.18, down 2.03% as of July 23, 2021, 12:40 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.