Monolithic Power Posted Another Tremendous Quarter, and We Expect More in 2022; Shares Attractive

We are raising our fair value estimate for Monolithic Power Systems to $480 per share, from $450, after another blowout quarter led us to extend our forecast for the firm’s current pace of torrential growth. MPS’ continuing level of growth and margin expansion is eye-popping, and we think a reflection of superior technology the firm is introducing to the market, which also informs our wide economic moat rating. In our view, MPS is investing in the right products for the right markets where it can differentiate and take meaningful share. Moreover, we’re impressed with its ability to introduce new products and move into modules to earn higher margins. We think MPS has benefitted from unconstrained capacity and share gains amidst a global chip shortage, and we expect its sticky, integrated designs to maintain share in a normalized environment. We also think MPS’ proactive capacity expansion plans put it in a good position to sustain supernormal sales growth for several years yet, even off a base of more than $1 billion. We continue to view shares as attractive and think the current share price is an enticing entry point for long-term investors to gain exposure to the disruptive wide-moat chipmaker.