By:
Sean Halverson, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Vicor Corporaton. (NYSE:VICR) is a designer of components and power
systems that are built to convert, regulate, and control electric currents.
• The company has
developed a 12V to 48V converter that is being used in data centers and
supercomputers to enhance their operational capabilities.
• Struggles with the
impact of tariffs on imports by China created headwind for the company on the
backend of 2018.
• The company experienced
weaker demand because of the “softening” in data center spending in China.
Key
points:
Even with the unexpected issues at the end of 2018, Vicor’s
backlog grew by 41% and management believes that bookings are going to increase
in Q2 and Q3 of 2019. They are strong believers that their converters and
Power-on-Package solutions are going to bring the company a lot of success in
creating a faster, more efficient data center.
As discussed within the
Q4 earnings call, the company has enabled their 48V technology to save 60 to 70
watts of power per processor. This is an extreme amount of savings in power and
is bringing an increase in the speed within the data center. The CEO, Patricio
Vinciarelli, commented that the automotive market is demanding the change to
48V. This can create a battery within vehicles that will increase fuel
efficiency by 10% or more.
VICR is moving quickly
towards what they are calling, “4G control”. In 2019, the company is going to
have a more developed point-of-load solution that is incorporating an RFM
front-end. This essentially means that this newer 4G model will become more
cost effective with higher performance attributes. With these advancements, the
company recognizes the potential of reaching an additional $10 million in
revenue over the course of the next year.
Vicor’s management is
still very firm in their belief that they are holding a technology that nobody
can compete with. Their ability to convert from 12V to 48V will eliminate the
need for excess wiring and space within the data center. Currently, NVIDIA is
utilizing Vicor’s technology in their newest supercomputer, the DGX-2. There is
strong evidence of the company becoming a serious disruptor in the computing
environment.
What
has the stock done lately?
After the Q4 release in
February of 2019, the stock had dropped 10.8% due to the headwinds with China.
However, a majority of the issues was within the rescheduling of orders. These
are expected to be fulfilled in 2019 and should hopefully reassure shareholders
of a more positive outlook.
Past
Year Performance:
At January 5th of 2018, the
stock was at a share price of $19.90. The price at the end of the year was at
$37.52, an 88.5% increase. Total revenue was up 25.4% on a year over year basis
and their “Advanced Product” revenue was up 36.8% between 2017 and 2018.
Source:
FactSet
My
Takeaway:
There is no question that
Vicor has been developing an innovative technology that will be extremely hard
to compete with. They currently recognize that they have no competition when it
comes to their 12V to 48V converters. Additionally, with a rapidly growing
backlog and a 50% increase in capacity to their largest facility, Vicor is
going to be positioned to be very successful in the coming years. It will take
a good portion of Q1 and Q2 of 2019 to smooth out the issues with China, but
this obstacle will be obsolete once the company is at its strongest. VICR is
the true definition of a disruptor and it will be interesting to see the
results of the first quarter in 2019.
Source:
FactSet
