On Monday, Loop Capital upgraded shares of Monolithic Power Systems (NASDAQ:MPWR) from Hold to Buy, maintaining a price target of $660.00. The decision comes after a notable 10% decline in the company's share price since November 11, 2024, when Loop Capital began covering the stock. The shares have also fallen approximately 40% from their 52-week high.
The recent sell-off was attributed to concerns that Monolithic Power Systems may lose some of its 100% market share in power management integrated circuits (PMICs) for NVIDIA (NASDAQ:NVDA)'s artificial intelligence GPU systems.
Additionally, fluctuations in NVIDIA's order patterns have led to an L-shaped trajectory in Monolithic's second-half fiscal year 2024 Enterprise Data revenue, despite an uptick in forecasts due to stronger performance in non-Enterprise Data segments.
Loop Capital believes that the market's reaction to these concerns is "overblown." The firm's confidence is supported by the consensus revenue forecast for fiscal year 2025, which stands at $2.66 billion.
They also anticipate that NVIDIA's Enterprise Data segment will contribute positively to the expected 20% growth rate in consensus revenue forecasts. This growth is not solely dependent on PMICs but may also be driven by AI ASICs and AMD (NASDAQ:AMD)'s M3xx series products.
The analyst at Loop Capital has expressed a positive outlook for Monolithic Power Systems, suggesting that the current share price presents a buying opportunity. The maintained price target of $660.00 reflects this optimistic view, despite the recent downturn in the stock's performance and the broader market concerns.
In other recent news, Monolithic Power Systems reported a record third-quarter earnings of $620.1 million, a 30% year-over-year increase, primarily due to gains in automotive, communication, and storage and compute segments.
Meanwhile, despite concerns over potential market share losses to competitors Renesas and Infineon (OTC:IFNNY), several firms maintained their positive ratings. Deutsche Bank (ETR:DBKGn) kept its Buy rating with a $900.00 stock price target, while TD Cowen and Needham reduced their price targets to $975 and $950, respectively, but maintained 'Buy' ratings. Conversely, Rosenblatt downgraded the stock from 'Buy' to 'Neutral', with a price target of $880.
Stifel upheld its Buy rating and $1,100 price target for Monolithic Power Systems, dismissing rumors of cancellations or ongoing technical issues with orders from its largest AI customer.
These are the recent developments concerning Monolithic Power Systems.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Monolithic Power Systems' financial position and market performance. Despite the recent stock price decline noted in the article, the company maintains a strong financial foundation. InvestingPro data shows that MPWR holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations, indicating financial stability.
The company's revenue growth remains robust, with a 30.59% increase in quarterly revenue as of Q3 2024. This aligns with Loop Capital's positive outlook on the company's future performance. Additionally, MPWR has demonstrated a commitment to shareholder returns, having raised its dividend for 6 consecutive years and maintained payments for 11 years, as highlighted by InvestingPro Tips.
However, investors should note that MPWR is trading at high valuation multiples across several metrics, including P/E, EBIT, and revenue. This could suggest that the stock is priced for high growth expectations, which aligns with the article's discussion of the company's market position in AI-related products.
For those seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for MPWR, providing deeper insights into the company's financial health and market position.
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