Shares of NI (NASDAQ: NATI), formerly National Instruments, are down nearly 20% so far this year amid a broader market sell-off due to macro headwinds. Also, persistent supply chain bottlenecks have impacted the company’s ability to meet demand and have led to higher lead times.
NI develops automated testing and measurement systems that help engineers and enterprises in research and validation of new technologies.
Tough Business Conditions
Despite solid demand, Ni’s Q1 revenue came in at the low end of its guidance and missed analysts’ expectations as well due to the unplanned suspension of its operations in Russia and the pandemic-led lockdown in Shanghai at the end of the quarter. Q1 revenue grew 15% to $385 million but lagged analysts’ expectations of $402.7 million. Further, adjusted EPS increased 28% to $0.41, but fell short of analysts’ consensus estimate of $0.44.
NI expects full-year revenue growth in the range of 12% to 18%. It anticipates higher costs due to the lack of components availability and increased freight costs to continue to impact its profitability.
NI is taking several steps to mitigate the impact of these short-term headwinds including, hiking prices, adding new suppliers, redesigning products to use available components, and promoting alternate products with similar features.
Growth Strategies
NI continues to make multiple acquisitions to capture growth opportunities in lucrative areas like wireless communication, vehicle electrification, advanced driver-assistance systems (ADAS), and new space technologies.
The company’s recent acquisitions, including NH Research, Heinzinger Automotive, and Kratzer Automation have strengthened its capabilities for EV battery test system, thus providing automakers with a scalable network of products, services, and solutions for testing EV or electric vehicle batteries.
Wall Street’s Take
Earlier this month, Goldman Sachs analyst Mark Delaney lowered his price target for NI stock to $43 from $48 but maintained a Buy rating. The analyst lowered his estimates and price targets for the U.S. Autos and industrial technology space to better reflect additional supply chain challenges in the near-term, and weaker demand in the intermediate-term.
Overall, the Street has a Strong Buy consensus rating on NI based on four Buys and one Hold. The average NI price target of $45.80 implies 30.45% upside potential from current levels.
Conclusion
Supply chain issues are expected to hit NI’s revenue as well as profitability over the near-term, which in turn could impact investors’ sentiment and influence NI stock’s near-term performance.
That said, Wall Street analysts are bullish about NI’s long-term prospects given the company’s focus on offering products and solutions for key growth areas like wireless communication and vehicle electrification.
Meanwhile, TipRanks’ Insider Trading tool indicates that Insider Confidence Signal for NI is currently Very Negative based on seven informative insider transactions made in the last three months. Insiders have sold NI shares worth $1.5 million in the last three months.
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