Why Is Monolithic (MPWR) Down 5.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Monolithic Power (MPWR). Shares have lost about 5.2% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Monolithic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Monolithic's Q4 Earnings & Revenues Beat Estimates

Monolithic Power Systems, Inc. reported fourth-quarter 2019 non-GAAP earnings of $1.04 per share, which beat the Zacks Consensus Estimate by almost 1%. Notably, the figure improved 5.1% on a year-over-year basis.

Revenues of $166.8 million improved 8.6% from the year-ago quarter, surpassing the Zacks Consensus Estimate of $163 million. The reported figure was also better than the higher end of management’s guidance of $160 million to $166 million.

Strong demand across Computing & Storage, Automotive and Communications end-markets drove year-over-year growth.

Quarter in Details

Revenues by Product Family

DC to DC segment (94.5% of total revenues) revenues improved 10.1% year over year to $157.5 million. However, Lighting Control (5.5% of total revenues) declined 12.1% to $9.2 million.

Revenues by End Market

Computing & Storage (33.4% of total revenues) revenues rose 27.8% year over year to $55.6 million.

Industrial (16%) revenues declined 0.7% year over year to $26.7 million.

Automotive (14.5%) revenues were $24.1 million, up 8.6%.

Communications (13.1%) revenues improved 8.5% to almost $21.9 million.

Consumer (23%) revenues fell 5.7% from the year-ago quarter to $38.4 million.

Margins in Detail

Non-GAAP gross margin contracted 10 basis points (bps) from the year-ago quarter to 55.5%. Management had predicted the figure between 55.2% and 55.8%.

Non-GAAP operating expenses were $41.8 million during the reported quarter, up 7.9% year over year. As a percentage of revenues, the figure expanded 110 bps on a year-over-year basis to 25%.

Non-GAAP operating income improved almost 9% year over year to $50.8 million. Non-GAAP operating margin (as a percentage of revenues) expanded 10 bps from the year-ago quarter to 30.5%.

Balance Sheet & Cash Flow

As of Dec 31, 2019, cash, cash equivalents and short-term investments were $455.4 million, up from $418.7 million reported at the end of the previous quarter.

Monolithic Power generated operating cash flow of approximately $61 million compared with $72.4 million in the prior quarter.

Guidance

For first-quarter 2020, Monolithic Power forecasts revenues between $161 million and $167 million.

Management anticipates non-GAAP gross margin between 55.4% and 56%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Monolithic has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Monolithic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.