We came across a bullish thesis on Monolithic Power Systems, Inc. (MPWR) on Substack by Long-Term Pick. In this article, we will summarize the bulls’ thesis on MPWR. Monolithic Power Systems, Inc. (MPWR)’s share was trading at $699.99 as of Feb 13th. MPWR’s trailing and forward P/E were 19.13 and 41.49 respectively according to Yahoo Finance.
A technician working on power management in a semiconductor factory.
Monolithic Power Systems (MPWR) continues to demonstrate strong growth, with a record-setting performance in 2024. The company’s full-year revenue reached $2.2 billion, marking a 21% year-over-year increase. Q4 2024 revenue alone saw a significant 37% surge, totaling $621.7 million compared to the same period in 2023. MPWR’s innovation pipeline remains robust, highlighted by the introduction of products such as a silicon carbide inverter for clean energy applications and a new line of automotive audio products utilizing DSP technology. In addition, the company raised its quarterly dividend by 25%, now paying $1.56 per share, and completed share repurchases under a $640 million buyback program. These actions underline MPWR’s focus on returning value to shareholders while positioning itself for continued growth.
However, there are some challenges on the horizon. The enterprise data segment, a key part of MPWR’s business, is expected to experience slower growth, with expectations leaning toward a flat performance in 2025, with growth concentrated in the latter half of the year. The company also faces uncertainty regarding product ramp-ups in the automotive and communications sectors, which could impact revenue projections. Additionally, delays in hyperscale project launches introduce volatility to MPWR’s revenue outlook, and the company lacks visibility into the complex dynamics between the CPU and GPU markets, which could affect its enterprise data components. Moreover, the AI sector within enterprise data remains unpredictable, adding further complexity to MPWR’s forecast for 2025.
Despite these headwinds, MPWR’s diversified growth strategy, continued product innovation, and strong financial position lead to an updated fair price estimate of $855. With a 5-year EPS growth forecast of over 24%, and a more conservative long-term growth expectation of 20%, MPWR remains an attractive investment with a compelling risk/reward profile.
Monolithic Power Systems, Inc. (MPWR) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held MPWR at the end of the third quarter which was 35 in the previous quarter. While we acknowledge the risk and potential of MPWR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MPWR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.