Analyst Note| William Kerwin |
Wide-moat Monolithic Power Systems blew through its sales and gross margin guidance ranges, again, in its second quarter, and we’re raising our fair value estimate to $426 per share, up from $340 previously. In the midst of a chip shortage, we think MPS is taking share from analog incumbents as it continuously introduces new SKUs into the market and gains name recognition—especially in the automotive market, which is its fastest growing by a large margin. We expect MPS to easily surpass $1 billion in revenue this year, and don’t think $2 billion is far behind. At our new valuation, we think MPS is fairly valued, even after a significant price run-up since its first-quarter earnings. While we would recommend waiting for a larger margin of safety, MPS is an appealing investment opportunity as a disruptive newcomer in a consolidating chip market.