Monolithic (MPWR) Up 23% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Monolithic Power (MPWR). Shares have added about 23% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Monolithic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Monolithic Power Q3 Earnings Beat, Top Line Falls Y/Y
Monolithic reported relatively modest third-quarter 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. However, the Kirkland, WA-based company witnessed a revenue contraction year over year, owing to a sales drop in various end markets. Despite solid design wins and an expanding customer base, fluctuating ordering patterns induced by near-term uncertainty impacted net sales during the quarter.
Net Income
Net income, on a GAAP basis, was $121.2 million or $2.48 per share compared with $124.3 million or $2.57 per share in the year-ago quarter. Top-line decline primarily led to this downturn in the net income.
Non-GAAP net income declined to $150.3 million or $3.08 per share from $170.7 million or $3.53 per share in the prior-year quarter. However, the bottom line surpassed the Zacks Consensus Estimate by a penny.
Revenues
Monolithic Power generated revenues of $474.9 million, down from $495.4 million in the year-ago quarter. The top line marginally beat the Zacks Consensus Estimate of $474 million. Weakness in several business verticals, such as Industrial and Communications, reversed the positive trends in the Automotive, Storage and Computing segments.
Storage and Computing revenues rose to $129.5 million, up 14.7% year over year owing to higher sales of commercial notebooks. Revenues fell short of the Zacks Consensus Estimate of $137 million.
Net sales from Enterprise Data improved to $98.9 million from $75.3 million in the year-ago quarter. The rise in both GPU and CPU program sales boosted the top line. Revenues surpassed the Zacks Consensus Estimate of $69.3 million.
In the third quarter, the Automotive segment contributed $95.2 million in revenues compared with $87.1 million in the year-ago quarter. The top line fell short of the Zacks Consensus Estimate of $104.4 million.
Industrial revenues stood at $42.1 million compared with $58.7 million in the year-ago quarter. Weak demand for security and industrial meter applications impeded the segment revenues. The top line missed the Zacks Consensus Estimate of $49.2 million.
The Communications vertical registered $46.8 million in revenues compared with $72.3 million in the year-ago quarter. Lower infrastructure sales hindered the top line in this segment. Revenues marginally beat the Zacks Consensus Estimate of $46.5 million.
Net sales from the Consumer segment declined to $62.4 million from $89.2 million in the year-ago quarter. A decline in TV and home appliance sales affected the revenue in this vertical. Higher gaming and monitor sales partially reversed this trend. Net sales missed the Zacks Consensus Estimate of $67.7 million.
By product family, revenues in DC-to-DC were $447.4 million, down from $463 million in the year-ago quarter. In the third quarter, Lighting Control revenues decreased to $27.5 million from $32.4 million in the prior-year quarter.
Other Details
Non-GAAP gross margin was 55.7%, down from 59% reported in the year-ago quarter, owing to unfavorable product mix.
Non-GAAP operating expenses came in at $96.6 million compared with $98.4 million reported in the prior-year period. Non-GAAP operating income was $167.8 million, down from $193.7 million. The downside was induced by top-line decline year over year.
Cash Flow & Liquidity
During the September quarter, the company generated an operating cash flow of $175.9 million. As of Sep 30, 2023, cash and cash equivalents totaled $421.2 million, with $77.4 million in other long-term liabilities.
Outlook
For the fourth quarter of 2023, the company estimates revenues within the range of $442-$462 million. Non-GAAP gross margin is expected between 55.4% and 56%. Non-GAAP operating expenses are projected between $95.9 million to $97.9 million. Total stock-based compensation expenses are expected in the range of $32.2 million to $34.2 million. Management anticipates near-term uncertainty to persist in the upcoming quarters.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, Monolithic has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Monolithic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Monolithic Power Systems, Inc. (MPWR) : Free Stock Analysis Report
