Analyst Note| William Kerwin |
We maintain our $562 fair value estimate for wide-moat Monolithic Power Systems after the company reported another strong quarter but provided guidance below our expectations. MPS is seeing the effects of broadly softer macroeconomic demand, particularly in its consumer market and the notebook portion of its computing market. Our long-term growth thesis for MPS is intact, and we continue to view the shares as deeply undervalued. We expect MPS to be able to offset pockets of weakness with strong performance in areas like data centers and automotive. We have already modeled a growth deceleration in 2023, but we continue to expect double-digit growth and gross margin expansion through the year. We think the 9% pullback for the stock after hours ignores MPS’ long-term opportunities and overemphasizes short-term incremental weakness.