Navitas Semiconductor (NVTS) Has a Promising Outlook After the LOKB Merger Date

Navitas Semiconductor (NVTS) is scheduled to go public through a reverse merger with the Live Oak Acquisition II (LOKB) SPAC. The merger was approved by LOKB shareholders on Oct. 13. What’s the forecast for Navitas stock, and will it rise more after the business combination?

Founded in 2014, Navitas is the leading producer of gallium nitride (GaN) power integrated circuits. The company believes that its next-generation semiconductor technology can provide up to three times speedier charging in chips that are half the size and weight of traditional silicon-based chips.

Navitas is expected to close its business combination with LOKB on Oct. 19. The common stock and warrants will start trading on the Nasdaq under the new ticker symbols “NVTS” and “NVTSW”, respectively, on Oct. 20. As part of its merger with LOKB, Navitas will receive about $398 million in gross cash proceeds, including $145 million in PIPE (private investment in public equity) at $10 per share.

Currently, LOKB stock is being tracked by just one Wall Street analyst, who has given the stock a "buy" rating and price target of $14. The stock is now 24.3 percent above its IPO price of $10 per share, but 7.2 percent below its 52-week high.

LOKB has assigned Navitas a pro forma implied equity value of $1.4 billion and an EV (enterprise value) of $1.0 billion. Based on this, its EV-to-2021 sales multiple is 37.0x, which is steep. The multiple for 2025 is 2.2x, which seems more reasonable. In comparison, Texas Instruments and Analog Devices have next-12-month EV-to-sales multiples of 9.8x and 9.7x, respectively.

The outlook for Navitas stock looks promising. The company has shipped over 18 million GaNFast devices to major clients such as Dell, Lenovo, LG, Amazon, Xiaomi, and Belkin. Navitas’s technology is used in mobile chargers, consumer and enterprise products, and renewables. Navitas expects its total addressable market opportunity to reach $13.1 billion by 2026.

Navitas has projected revenue of $27 million in 2021 and expects its revenue to rise 156 percent year-over-year to $69 million in 2022. The company expects revenue of $454 million and EBITDA of $102 million in 2025, and to turn EBITDA-positive in 2023. Investors should note that Navitas stock may experience the same post-merger blues that stocks tend to see after their SPAC merger.

Navitas is looking forward to transforming the semiconductor market with its new GaN power chips. The company believes it will be cheaper to manufacture GaN mobile chargers than legacy silicon chips in three years. The GaN market is anticipated to double each year, reaching $2 billion by 2026.

Navitas believes it has a multiyear lead in next-generation GaN power chips, and plans to expand into data centers, electric vehicles, and solar panels. Navitas GaN chips run up to 20 times faster than legacy silicon chips, with 40 percent energy savings. Overall, Navitas stock looks like a good long-term investment based on its strong growth outlook.