Monolithic Power's Prospects Look Bright: Should You Buy?

By Zacks Investment ResearchStock MarketsDec 19, 2017 10:30PM ET

www.investing.com/analysis/monolithic-powers-prospects-look-bright-should-you-buy-200274783

Monolithic Power's Prospects Look Bright: Should You Buy?

By Zacks Investment Research | Dec 19, 2017 10:30PM ET

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Monolithic Power Systems Inc. (NASDAQ:MPWR) has been on a healthy growth trajectory of late. With positive revision estimates over the last 60 days and strong fundamentals, Monolithic presents an attractive investment opportunity.

Shares of the company have returned 39.1% inthe past year, outperforming the industry’s rally of 25.9%.

Positive Earnings Surprise

Monolithic Power has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 2.21%.

Moreover, the company has an expected long-term EPS growth rate of 18%.

Upward Estimate Revisions

Over the last 60 days, fiscal 2017 estimates were revised upward, taking the Zacks Consensus Estimate up from $2.88 to $2.91 per share.

Key Catalysts

The increasing demand for analog Integrated Circuit (IC) and sensors and deep-rooted partnerships with leading auto suppliers are driving the company’s top line. Monolithic Power expects its Served Addressed Market (SAM) for the automotive industry to expand significantly, which will boost revenues.

We expect the company to benefit from the ongoing Grantley to Purley platform conversion in the server market as well as from increased demand for servers due to the ongoing adoption of cloud computing.

Monolithic Power is also making use of artificial intelligence (AI) to predict user performance and enhance its e-commerce platform. This will help users to input desired products and specific needs. This customer centric approach will not only expand its customer base but also help the company penetrate the small and medium business segment.

Upbeat Q3 Results

The company reported earnings of 84 cents, beating the Zacks Consensus Estimate by a couple of cents and increasing 27.3% from the year-ago quarter.

Revenues increased 21.1% from the year-ago quarter to reach $129 million, beating the Zacks Consensus Estimate of $126 million.

Monolithic Power Systems, Inc. Revenue (TTM)

Monolithic Power Systems, Inc. Revenue (TTM) | Monolithic Power Systems, Inc. Quote

Management stated that Automotive is Monolithic’s largest SAM opportunity at $6 billion. The company plans to offer a number of new products for applications in body controls, lighting, infotainment and ADAS.

We also note that the company has a strong clientele in the automotive market, which includes Delphi Automotive Plc, Mitsubishi, Magna and others.

To Conclude

Looking at these positives, we believe that Monolithic Power is one technology stock that deserves a place in investors’ portfolio.

Zacks Rank & Key Picks

Monolithic Power carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader technology sector are NetApp, Inc (NASDAQ:NTAP) , NVIDIA Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NetApp, NVIDIA and Intel have a long-term expected EPS growth rate of 11.34%, 10.25% and 8.42%, respectively.

5 Medical Stocks to Buy Now

Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.

New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.

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NetApp, Inc. (NTAP): Free Stock Analysis Report

Intel Corporation (INTC): Free Stock Analysis Report

NVIDIA Corporation (NVDA): Free Stock Analysis Report

Monolithic Power Systems, Inc. (MPWR): Free Stock Analysis Report

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Monolithic Power's Prospects Look Bright: Should You Buy?

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