MPWR - Monolithic Power Systems: Still In Bed With AI Still A Buy
2024-07-12 14:36:51 ET
Summary
- We remain buy-rated on Monolithic Power Systems, Inc. in 2H24 and 2025.
- Our positive thesis of AI-related tailwinds offsetting lackluster demand from other business lines remains in play into 2025.
- We're not too bothered by the higher multiple, as we believe MPWR is uniquely positioned to match growth expectations that the market is pricing in.
- We expect Nvidia to guide softly for its October quarter in comparison to consensus, and hence see a pullback of names with AI exposure like MPWR. We recommend investors load up on that pullback.
We published a buy rating on Monolithic Power Systems, Inc. ( MPWR ) back in November 2023 with the positive thesis that MPWR's AI-related revenue would be enough to offset muted demand from its other business lines: computing, automotive, consumer, and industrial. Our thesis played out to play out in 3Q23 , 4Q23 , and 1Q24 , with management reporting higher enterprise data-related sales each quarter, up 106% Q/Q in 3Q23, 30% Q/Q in 4Q23, and 16% Q/Q and a whopping 217% Y/Y to $149.7M or ~33% of total sales in 1Q24. Simultaneously, management reported declines in its other business lines with the following results in 1Q24: computing -10%; automotive -3%; consumer -13%; and industrial -9%, respectively, due to weaker end demand....
Monolithic Power Systems: Still In Bed With AI, Still A Buy