Navitas: Fundamentals Are Bearish But You Can't Fight Animal Spirits (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• Navitas's bullish narrative hinges on hopes of becoming a key Nvidia supplier, but no commercial contracts are confirmed and revenue impact is years away.
• Near-term revenue outlook for NVTS is weak, with high China exposure, a sub- industry downturn, and major execution risk from a critical foundry supplier transition.
• The company is also unprofitable and burning cash every quarter. But it has enough funding to last at least 3 years at this rate.
• Valuation is at extreme levels at an 85.5x 1-yr forward revenue multiple. The valuation multiple is exploding up whilst earnings expectations are declining—a clear sign of hype.
• I am still bearish on the stock fundamentally. But from a positioning perspective, I have to account for the strongly bullish technical price and volume action. So I take the middle ground in my stance.

Read the full article here.