Is Monolithic Power Systems a high-risk growth stock to buy?
It's no surprise to see investors embracing Monolithic Power Systems after a report of this caliber. This jump is a welcome break from the recent downtrend, as Monolithic was swept up in the marketwide retreat from high-risk growth stocks. Even now, the stock is trading 26% below November's all-time highs.
Is monolithic power shrugging off supply chain challenges?
Monolithic Power is shrugging off supply chain challenges as we speak, positioning the company to deliver wider profit margins and accelerated revenue growth over the next few quarters. "We have a lot more we can chew off now," CEO Michael Hsing said on October's third-quarter earnings call. "As of today, we have blue skies."
What does monolithic power systems do?
Monolithic Power Systems, based in Kirkland, WA, designs, develops and markets high-performance power solutions. The company focuses on the market for high-performance analog and mixed-signal integrated circuits (ICs).
What happened to high-flying growth stocks in January 2022?
Many high-flying growth stocks took a beating in January 2022. For example, shares of Datadog (NASDAQ:DDOG) fell 18% last month while Monolithic Power Systems (NASDAQ:MPWR) took an 18.3% haircut, according to data from S&P Global Market Intelligence. The Trade Desk (NASDAQ:TTD) fell even further, posting a 24.1% price drop.
Is Monolithic Power a buy?
Monolithic Power Systems has received a consensus rating of Buy. The company's average rating score is 3.00, and is based on 9 buy ratings, no hold ratings, and no sell ratings.
Who owns Monolithic Power Systems?
Michael HsingMichael Hsing, pioneering engineer and CEO, founded Monolithic Power Systems, Inc. in 1997 with the belief that an entire power system could be integrated onto a single chip.
How many employees does Monolithic Power Systems have?
Monolithic Power SystemsTrade nameMPWRTotal equityUS$1.24 billion (2021)Number of employees2,773 (2022)Websitemonolithicpower.comFootnotes / references12 more rows
What does monolithic power do?
Monolithic Power Systems is a leading company at high performance power solutions. With 20 years on the market, MPS provides efficient, easy to use parts that include power management integrated circuits and full solutions, power modules, sensors, motor drivers, and smart motors.
Key Points
NASDAQ: MPWR
With heavy demand for its products amid a global supply chain squeeze, Monolithic is expanding its own manufacturing capacity.
What happened
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So what
Shares of Monolithic Power Systems ( MPWR 1.38% ) rose as much as 14.7% on Friday morning, reaching that peak at 9:49 a.m. ET. The earnings-inspired spike faded somewhat later in the day, leaving share prices 5.3% above Thursday's closing level four hours later.
Now what
The maker of semiconductor-based power management systems reported fourth-quarter sales of $336.5 million, 44% above the year-ago period's result. Adjusted earnings increased by 62% to $2.12 per diluted share.
NASDAQ: MPWR
The company is working around the global semiconductor manufacturing challenges by ramping up its in-house chip-making assets. Monolithic expanded its manufacturing capacity by 40% in 2021 and is aiming for another increase of at least 60% this year.
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It's no surprise to see investors embracing Monolithic Power Systems after a report of this caliber. This jump is a welcome break from the recent downtrend, as Monolithic was swept up in the marketwide retreat from high-risk growth stocks. Even now, the stock is trading 26% below November's all-time highs.
Monolithic Power Q4 Earnings & Revenues Beat Estimates
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Revenues by Product Family
Monolithic Power Systems, Inc. reported fourth-quarter 2020 non-GAAP earnings of $1.31 per share, which beat the Zacks Consensus Estimate by 5.65%. Notably, the bottom line surged 26% on a year-over-year basis. Revenues of $233 million climbed 39.8% from the year-ago quarter’s figure and surpassed the Zacks Consensus Estimate by 3.22%.
Revenues by End Market
Revenues in the DC to DC segment (94.4% of total revenues) climbed 39.6% year over year to $219.9 million. Moreover, Lighting Control (5.6% of total revenues) revenues improved 42.3% to $13.1 million.
Summary
Computing & Storage (26% of total revenues) revenues increased 11.1% year over year to $61.8 million.
MPS had another great quarter in Q1 FY2021
MPS continued its string of strong quarterly growth when it grew revenue and earnings by more than 50% in Q1 and a forecast calling for more.
Why MPS seems to have lost a step since Q3 FY2020
Recent numbers from MPS have all been great and Q1 FY2021 was no exception. Q1 revenue increased by 53.5% YoY to $254.5M and non-GAAP EPS increased by 53.7% to $1.46. Note that the GAAP numbers for net income and EPS were negatively impacted by an income tax expense of $3.26M in Q1 FY2021.
How MPS compares versus its competitors
However, the report was marred by something else. MPS has acknowledged that part of the reason why the Q3 numbers were so good was because they got a boost from inventory building. Customers in China, for instance, ordered more as a precaution against possible trade sanctions from the U.S. A previous article covers this issue in greater detail.
Investor takeaways
MPS is a supplier of analog solutions, especially power semiconductors. The analog market is relatively crowded, which means that MPS has to go up against a lot of companies. MPS states in its most recent Form 10-K that:
What do These Ratings Mean?
If MPS is in a state of quandary as it appears to be, then there are good reasons why. The stock has not behaved the way one would expect for a company whose revenue and EPS grew by more than 50%. The stock has basically moved sideways since Q3 FY2020, even though earnings are as good as ever.
What's Happening With Monolithic Power Systems, Inc. Stock Today?
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Key Points
Monolithic Power Systems, Inc. (MPWR) stock is down -1.74% while the S&P 500 has risen 0.82% as of 3:42 PM on Friday, Dec 10. MPWR is lower by -$8.98 from the previous closing price of $515.59 on volume of 340,161 shares. Over the past year the S&P 500 is higher by 28.29% while MPWR has risen 64.88%.
NASDAQ: DDOG
These stocks posted skyrocketing gains in 2020 and 2021, setting them up for a drastic correction in early 2022.
What happened
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
So what
Many high-flying growth stocks took a beating in January 2022. For example, shares of Datadog ( DDOG -0.05% ) fell 18% last month while Monolithic Power Systems ( MPWR -1.58% ) took an 18.3% haircut, according to data from S&P Global Market Intelligence. The Trade Desk ( TTD -4.16% ) fell even further, posting a 24.1% price drop.
NASDAQ: DDOG
None of these companies earned their discounts from bad news or disappointing results. All three are set to report quarterly results over the next two weeks.
Now what
They do have some significant data points in common, though. The three stocks under my microscope posted market-crushing returns in the two years leading up to the painful corrections of January:
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Market makers are treating growth stocks like a hot potato these days. Historically high inflation rates are pushing lawmakers toward a more conservative fiscal policy with rising interest rates and lower market-boosting efforts. My chosen set of tech companies are barely profitable as they focus on maximizing top-line growth above all else.
