Tuesday, Loop Capital initiated coverage on Monolithic Power Systems (NASDAQ:MPWR) shares with a Hold rating and set a price target of $660. The firm acknowledges Monolithic Power Systems' consistent market share growth in the power management semiconductor sector under various market conditions. The company's performance is linked to its involvement in AI-accelerated GPU compute and high-performance computing.
The analyst notes that Monolithic Power Systems' shares are currently valued at approximately 37 times the next twelve months' (NTM) non-GAAP earnings per share (EPS). Despite this, the stock has slightly underperformed the Semiconductor Index (SOX) year-to-date by about 25 percentage points.
However, it has outperformed the SOX by around 13 percentage points in calendar year 2023 and has shown approximately 50% better performance over a five-year period compared to the SOX.
Loop Capital's current stance is influenced by the belief that there may be a more favorable moment to adopt a more positive rating on Monolithic Power Systems' shares. The firm anticipates a potential opportunity to revise their rating between now and the expected launch of NVIDIA (NASDAQ:NVDA)'s Rubin in 2026. Rubin is anticipated to be the first possible intercept point for a vertical power solution that could be utilized by NVIDIA.
The firm's decision to maintain a Hold rating reflects a careful approach, considering the current stock valuation and the anticipation of future developments that could affect Monolithic Power Systems' market position. The price target of $660 suggests a neutral view on the stock's potential for growth in the near term.
In other recent news, Monolithic Power Systems has been the subject of various analyst adjustments following significant developments. The company reported record third-quarter earnings of $620.1 million, marking a 30% year-over-year increase, driven primarily by gains in automotive, communication, and storage and compute segments.
Amidst concerns over potential market share losses to competitors Renesas and Infineon (OTC:IFNNY), Deutsche Bank (ETR:DBKGn) maintained its Buy rating and $900.00 stock price target for the company, while TD Cowen reduced its price target to $975 while maintaining a 'Buy' rating. Needham also reduced its price target to $950, keeping a 'Buy' rating, and Rosenblatt downgraded the stock from 'Buy' to 'Neutral', maintaining 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. The company clarified that while it has not received orders for NVIDIA's Blackwell platform yet, this is not unexpected, and orders are anticipated soon.
Despite the potential competition from Renesas, Monolithic Power Systems is expected to see high single-digit percentage year-over-year growth in revenue from NVIDIA in the calendar year 2025. These are the recent developments concerning Monolithic Power Systems.
InvestingPro Insights
Recent data from InvestingPro adds depth to Loop Capital's analysis of Monolithic Power Systems (NASDAQ:MPWR). The company's market capitalization stands at $31.58 billion, with a P/E ratio of 70.84, reflecting the premium valuation noted by Loop Capital. This high multiple is further emphasized by InvestingPro Tips, which indicate that MPWR is trading at high earnings, EBIT, EBITDA, revenue, and Price/Book multiples.
Despite the elevated valuation, MPWR demonstrates financial strength. An InvestingPro Tip highlights that the company holds more cash than debt on its balance sheet, with liquid assets exceeding short-term obligations. This solid financial position supports MPWR's ability to invest in growth opportunities, particularly in AI-accelerated GPU compute and high-performance computing sectors mentioned in the article.
The company's revenue growth remains robust, with a 30.59% increase in the most recent quarter, aligning with Loop Capital's observation of consistent market share growth. Additionally, MPWR has maintained a strong dividend policy, raising its dividend for 6 consecutive years and maintaining payments for 11 years, as noted by InvestingPro Tips.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for MPWR, providing a broader perspective on the company's financial health and market position.
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