Company Reports

We think Monolithic Power Systems is a disruptor in the power management chip market, using its proprietary process technology to differentiate from larger competitors. In our view, electrical engineers tend to buy power management semiconductors from reputable, proven vendors that use lagging-edge manufacturing. As a relative newcomer, MPS differentiates via its unique fabless model, with which it develops advanced manufacturing processes that integrate many functions on a single chip to offer a smaller form factor and greater energy efficiency to its customers. While MPS remains a small player in power management, we think revenue growth far above its largest competitors shows its differentiated approach to power management is gaining traction in the market.

We raise our fair value estimate for wide-moat Monolithic Power Systems to $600 per share, from $540, behind a higher forecast for the firm's sales into data centers and artificial intelligence applications. MPS’ first-quarter results beat our expectations and second-quarter guidance met our above-consensus model. MPS’ strong data center sales are offsetting weakness in its other end markets and we expect this dynamic to continue through 2024. We like MPS’ position as a disruptor in power chips, which drives share gains and enables the firm to win significant business alongside AI accelerators. We still see shares as modestly overvalued, however.

We raise our fair value estimate for wide-moat Monolithic Power Systems to $540 per share, from $535, as we raise our long-term expectations for revenue from artificial intelligence, or AI, applications. We are also lowering our estimates for MPS’ other end markets in 2024 behind choppier short-term demand. MPS excels at power efficiency, which has earned its power management chips strong placement alongside Nvidia GPUs that serve power-intensive AI models. While we expect surging AI investment to draw in new entrants to compete with MPS, we believe the firm’s position exemplifies its moaty intangible assets in power chip design, which should enable it to keep a strong market share. We expect growth in 2024 but stronger growth thereafter under healthier end market conditions outside of AI. Nevertheless, we see shares as overvalued for this high-quality company.

We think Monolithic Power Systems is a disruptor in the power management chip market, using its proprietary process technology to differentiate from larger competitors. In our view, electrical engineers tend to buy power management semiconductors from reputable, proven vendors that use lagging-edge manufacturing. As a relative newcomer, MPS differentiates via its unique fabless model, with which it develops advanced manufacturing processes that integrate many functions on a single chip to offer a smaller form factor and greater energy efficiency to its customers. While MPS remains a small player in power management, we think revenue growth far above its largest competitors shows its differentiated approach to power management is gaining traction in the market.

We maintain our fair value estimate for wide-moat Monolithic Power Systems at $535 per share after its third-quarter results and fourth-quarter guidance met our expectations. MPS’ sales into data centers did tremendously well in the quarter, but the rest of its end markets continued to see softer customer spending. MPS is on track for a tame year of results by its own high standards, but we continue to expect growth to inflect back up behind its ability to gain share and benefit from trends like artificial intelligence, or AI, and electric vehicles. Despite weak end markets, we see MPS’ share gains across its served markets as sticky and reflective of its wide economic moat. Shares rose 5% on the good results, but we continue to see them as nicely undervalued.

We maintain our $535 fair value estimate for wide-moat Monolithic Power Systems’ shares after its second-quarter results and third-quarter guidance met our expectations. We see MPS’ execution as solid amid customers continuing to work through excess inventories and offering low order visibility. MPS is a meaningful secondary beneficiary of the recent surge in artificial intelligence spending, but its growth in AI sales is partially offset by lower spending allocation to traditional computing. We reiterate our view that MPS is well-positioned for strong, long-term growth with highly differentiated chips that can benefit from secular trends like AI and electrified vehicles. We believe the 7% selloff after reporting reflects the market being overly focused on near-term market dynamics. We see shares as fairly valued.

We trim our fair value estimate for wide-moat Monolithic Power Systems to $535 per share, from $562, after first-quarter results met our expectations but second-quarter guidance came in lower than we forecast. End-market weakness is continuing for MPS, and we have lowered our 2023 forecasts to reflect a meaningful rebound being pushed out into 2024. Still, we don’t worry about MPS’ long-term opportunity or growth prospects. MPS’ chips are differentiated and the firm is steadily moving up the value chain across its served markets. With strong fundamental demand and unconstrained supply, we see near-term dynamics reflecting delayed, not destroyed, demand. The market reaction to results, a 10% selloff, was overly punitive in our view, and we continue to see shares as attractive.

We think Monolithic Power Systems is a disruptor in the power management chip market, using its proprietary process technology to differentiate from larger competitors. In our view, electrical engineers tend to buy power management semiconductors from reputable, proven vendors that use lagging-edge manufacturing. As a relative newcomer, MPS differentiates via its unique fabless model, with which it develops advanced manufacturing processes that integrate many functions on a single chip to offer a smaller form factor and greater energy efficiency to its customers. While MPS remains a small player in power management, we think revenue growth far above its largest competitors shows its differentiated approach to power management is gaining traction in the market.

We maintain our $562 fair value estimate for wide-moat Monolithic Power Systems after a good fourth quarter that met our expectations. We forecast growth deceleration in 2023 as MPS encounters softer demand, but note this still implies double-digit sales growth. MPS’ recent performance has been stupefying, tripling its top line in four years and expanding non-GAAP operating margin by 8%. The firm has gained meaningful share from larger and more established analog competitors, and we see these gains as sticky for MPS’ differentiated chips. We continue to be impressed with the company’s ability to ascend the value chain, even in difficult markets like automotive, while exerting operating leverage. The stock has run up 35% since the start of the year, but we still see modest upside for long-term investors.

We think Monolithic Power Systems is a disruptor in the power management chip market, using its proprietary process technology to differentiate from larger competitors. In our view, electrical engineers tend to buy power management semiconductors from reputable, proven vendors that use lagging-edge manufacturing. As a relative newcomer, MPS differentiates via its unique fabless model, with which it develops advanced manufacturing processes that integrate many functions on a single chip to offer a smaller form factor and greater energy efficiency to its customers. While MPS remains a small player in power management, we think revenue growth far above its largest competitors shows its differentiated approach to power management is gaining traction in the market.

We maintain our $562 fair value estimate for wide-moat Monolithic Power Systems after the company reported another strong quarter but provided guidance below our expectations. MPS is seeing the effects of broadly softer macroeconomic demand, particularly in its consumer market and the notebook portion of its computing market. Our long-term growth thesis for MPS is intact, and we continue to view the shares as deeply undervalued. We expect MPS to be able to offset pockets of weakness with strong performance in areas like data centers and automotive. We have already modeled a growth deceleration in 2023, but we continue to expect double-digit growth and gross margin expansion through the year. We think the 9% pullback for the stock after hours ignores MPS’ long-term opportunities and overemphasizes short-term incremental weakness.

We think Monolithic Power Systems is a disruptor in the power management chip market, using its proprietary process technology to differentiate from larger competitors. In our view, electrical engineers tend to buy power management semiconductors from reputable, proven vendors that use lagging-edge manufacturing. As a relative newcomer, MPS differentiates via its unique fabless model, with which it develops advanced manufacturing processes that integrate many functions on a single chip to offer a smaller form factor and greater energy efficiency to its customers. While MPS remains a small player in power management with about a 2% market share, we think revenue growth far above its largest competitors over the last four years shows its differentiated approach to power management is gaining traction in the market.

We think Monolithic Power Systems is a disruptor in the power management chip market, using its proprietary process technology to differentiate from larger competitors. In our view, electrical engineers tend to buy power management semiconductors from reputable, proven vendors that use lagging-edge manufacturing. As a relative newcomer, MPS differentiates via its unique fabless model, with which it develops advanced manufacturing processes that integrate many functions on a single chip to offer a smaller form factor and greater energy efficiency to its customers. While MPS remains a small player in power management with about a 2% market share, we think revenue growth far above its largest competitors over the last four years shows its differentiated approach to power management is gaining traction in the market.

We modestly raise our fair value estimate for Monolithic Power Systems, or MPS, to $562 per share, from $540 previously, after second-quarter sales crushed guidance. MPS guided the third quarter roughly in line with our prior expectations, but we expect impressive results to continue through the end of 2022 and into 2023. MPS continues to gain traction in data center builds and mission-critical automotive sockets, and we view its share gains over the past few years as sticky. We aren’t overly worried about potential weakening in the broader semiconductor market for MPS, given its unique chip designs and low fixed capital base—both of which also underpin our wide economic moat rating. Shares rose after the print, but we continue to view MPS as undervalued.

We think Monolithic Power Systems is a disruptor in the power management chip market, using its proprietary process technology to differentiate from larger competitors. In our view, electrical engineers tend to buy power management semiconductors from reputable, proven vendors that use lagging-edge manufacturing. As a relative newcomer, MPS differentiates via its unique fabless model, with which it develops advanced manufacturing processes that integrate many functions on a single chip to offer a smaller form factor and greater energy efficiency to its customers. While MPS remains a small player in power management with about a 2% market share, we think revenue growth far above its largest competitors over the last four years shows its differentiated approach to power management is gaining traction in the market.

We’re raising our fair value estimate for wide-moat Monolithic Power Systems, or MPS, to $540 per share, from $480 previously, as the company continues to make light work out of steamrolling our above consensus top line expectations. MPS’ first-quarter results were strong, and its impressive second-quarter guidance makes us confident it can retain momentum toward 40% sales growth for the full year. We think MPS is benefitting from tight supply at competitors allowing it to take share, which we think will be sticky in the long run. We also expect MPS to benefit from a new data center refresh cycle in the back half of 2022, and think its differentiated, integrated technology will pave long-term growth and market share gains. Shares were up 7% after hours on strong guidance, but we continue to think the market is undervaluing the long-term growth opportunity for MPS.

We think Monolithic Power Systems is a disruptor in the power management chip market, using its proprietary process technology to differentiate from larger competitors. In our view, electrical engineers tend to buy power management semiconductors from reputable, proven vendors that use lagging-edge manufacturing. As a relative newcomer, MPS differentiates via its unique fabless model, with which it develops advanced manufacturing processes that integrate many functions on a single chip to offer a smaller form factor and greater energy efficiency to its customers. While MPS remains a small player in power management with about a 2% market share, we think revenue growth far above its largest competitors over the last four years shows its differentiated approach to power management is gaining traction in the market.

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.

We view Monolithic Power Systems, or MPS, as undervalued, and reiterate our $450 per share fair value estimate. MPS shares have tumbled more than 20% since the start of 2022, but we view this as a symptom of a broader sell-off in the technology sector (the PHLX semiconductor index is down 17% year to date). We continue to view MPS’ growth prospects as sturdy and its wide economic moat intact. We think technology stocks have sold off from a flight to safety by investors concerned about inflationary pressures and chip stocks have been especially punished over concerns of the current tight supply environment receding sometime in the coming year. We aren’t overly worried about MPS’ prospects upon a potential supply glut, as we think its highly integrated chips win designs in sticky applications where they aren’t easily replaced, and command pricing power for it. MPS shares closed Tuesday at a 17% discount to our fair value, and we think this is an attractive entry opportunity for investors.

Wide-moat Monolithic Power Systems reported another strong quarter, with the top and bottom line exceeding guidance. We are raising our fair value estimate to $450 per share, up from $426, behind slightly stronger growth expectations. We continue to find significant value in MPS’ cutting-edge chip design expertise and expanding module-based integrated solutions strategy. We think a growing mix of module sales, benefiting from increasing end-market demand for system-level solutions and carrying higher ASPs, to be a material contributor to revenue growth in the long term. Shares dipped 4% after hours following the release, which we attribute to a lower gross margin guide, though we note the sequential contraction is purely due to a onetime benefit this quarter. Despite the pullback, we continue to think the market is pricing in more rapid share gains and margin expansion than we think feasible, and view shares as overvalued.