Monolithic Power Systems Faces Sales Concerns Amidst Market Challenges
Monolithic Power Systems, Inc. (MPWR), a fabless semiconductor company with a market cap of $27.3 billion, specializes in high-performance power solutions. They manufacture analog and mixed-signal integrated circuits (ICs) across various sectors, including industrial, automotive, and telecommunications.
Stock Performance Falls Short
Over the past year, shares of the Kirkland, Washington-based firm have not kept pace with the overall market. While MPWR stock has increased only 2.5% in the last 52 weeks, the S&P 500 Index ($SPX) surged by 31.8%. So far in 2024, MPWR shares have declined by 11.2%, in stark contrast to the SPX’s 25.8% rise.
Comparative Returns Undermine Confidence
In addition, MPWR’s growth has trailed that of the Technology Select Sector SPDR Fund (XLK), which returned 25.6% over the past 52 weeks and 20.3% year-to-date.
Mixed Financial Results Raise Questions
On October 30, Monolithic Power reported a better-than-expected Q3 adjusted EPS and revenue of $620.1 million. However, its stock fell 17.5% the following day due to a less optimistic Q4 outlook projecting sales to dip to between $600 million and $620 million. Concerns grew as delays in Nvidia’s Blackwell chips raised uncertainty regarding growth in MPWR’s Enterprise Data segment. A downgrade from analysts at Rosenblatt, who noted increasing competition from Infineon and Renesas, added to the company’s challenges.
Severe Setbacks Impact Future
The stock plummeted nearly 15% on November 11 after reports from Edgewater Research indicated that Nvidia had canceled half of MPWR’s backlog and eliminated unconfirmed orders for its power management chips. This raised alarms about potential product issues and their implications for MPWR’s AI division.
Forecasts and Analyst Ratings
For the fiscal year ending in December, analysts project MPWR’s EPS to increase by 19.1% year-over-year to reach $10.46. The company has had a mixed earnings history, beating estimates once in the last four quarters while falling short three times.
Currently, among 13 analysts monitoring the stock, the consensus rating stands at “Moderate Buy” based on eight “Strong Buy” ratings, two “Moderate Buys,” and three “Holds.”
Price Target Adjustments
On November 19, KeyBanc revised its price target for Monolithic Power to $700, while keeping an “Overweight” rating. The firm anticipates that MPWR could lose substantial market share in Blackwell related to overheating problems with the Hopper PMIC, likely allowing Infineon to become the primary supplier.
As of this writing, MPWR trades below the average price target of $830.64. The highest target on the Street, set at $1,100, suggests a potential upside of 96.3%.
On the date of publication, Sohini Mondal did not hold (directly or indirectly) positions in any of the securities mentioned in this article. The information provided in this article is for informational purposes only. Please refer to the Barchart Disclosure Policy for more details.
The views expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
