Analyst Note| William Kerwin |
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.