Monolithic Power Stock: Buy, Sell, or Hold?

Valued at $28.3 billion by market cap, Monolithic Power Systems Inc. (MPWR) is an analog and mixed-signal integrated circuit (IC) semiconductor company that is involved in the design, development, and distribution of high-performance power solutions. The fabless semiconductor specialist works with multiple industries, including telecom, automotives, cloud computing, and data centers.

MPWR stock is an S&P 500 Index ($SPX) constituent, and has underperformed the broad-market benchmark considerably in 2024. MPWR is down 5.5% on a year-to-date basis, compared to a return of 25.8% for the SPX.

The semiconductor stock is down 33.8% in the last month alone, with MPWR selling off sharply after earnings in late October - and again amid concerns that a key customer may be reducing orders.

Monolithic Plunges on Q4 Guidance

Monolithic Power reported its third-quarter results on Oct. 30, where it beat analysts' estimates on earnings and revenue, but came up short on guidance. 

The company posted a profit of $144.4 million, which translated to $4.06 per share on an adjusted basis, against Wall Street's estimated profit of $3.96 per share. Revenue for the quarter came to $620.1 million, easily topping estimates of $600.1 million.

MPWR reported adjusted operating income of $220.8 million, beating the consensus estimate of $215.6 million, with the operating margin of 26.5% down from last year’s 28.5%. It had a gross margin of 55.4%, flat from the same quarter last year, and ended the quarter with a cash balance of $700.3 million, up from $527.8 million last year.

Management expects revenue for the ongoing quarter in the range of $600 million to $620 million with a gross margin between 55.5% and 56.1%, and operating expenses around $122.0 million to $124.0 million. 

At the midpoint, MPWR's revenue guidance matched estimates. Disappointed investors sold the news, with the stock trading down 17.5% the day after earnings.

Is MPWR Losing Nvidia Orders?

Monolithic Power stock sold off again in mid-November, after a report from Edgewater Research suggesting that Nvidia (NVDA), a major client, had canceled up to half its backlog with MPWR due to performance issues.

In a regulatory filing and on a call with analysts, Monolithic Power denied any performance issues and confirmed that it remains on Nvidia's order book for its next-gen chips, with no changes to its Q4 guidance. 

However, MPWR shares fell nearly 15% on Nov. 11, and ended that week down 24.7%.

Is Monolithic Power Stock Oversold?

Analysts have weighed in on MPWR with a few recent updates to their ratings, starting with a downgrade to “Neutral” at Rosenblatt after earnings. Following the NVDA reports, sentiment has been somewhat mixed. 

Loop Capital upgraded MPWR stock to “Buy,” arguing that Nvidia-related concerns are overblown, while KeyBanc kept its “Overweight” rating - but noted that it expects significant Blackwell share loss, though the firm sees that risk as mostly priced in.

Overall, MPWR stock is still a “Strong Buy” overall, with 12 analysts in coverage. The mean price target now stands at $887.70, suggesting the stock can rise 46.5% from current levels.