Monolithic Power Systems (NASDAQ:MPWR) Reports Q4 In Line With Expectations, Provides Encouraging Quarterly Guidance
Power management chips maker Monolithic Power Systems (NASDAQ:MPWR) reported results in line with analysts' expectations in Q4 FY2023, with revenue down 1.3% year on year to $454 million. The company expects next quarter's revenue to be around $447 million, coming in 2.3% above analysts' estimates. It made a non-GAAP profit of $2.88 per share, down from its profit of $3.17 per share in the same quarter last year.
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Monolithic Power Systems (MPWR) Q4 FY2023 Highlights:
Revenue: $454 million vs analyst estimates of $452.2 million (small beat)
EPS (non-GAAP): $2.88 vs analyst estimates of $2.85 (small beat)
Revenue Guidance for Q1 2024 is $447 million at the midpoint, above analyst estimates of $436.9 million
Inventory Days Outstanding: 172, up from 171 in the previous quarter
Gross Margin (GAAP): 55.3%, down from 58.2% in the same quarter last year
Market Capitalization: $30.33 billion
“While we continue to be cautious about near-term business conditions, we believe our long-term growth strategy remains intact, and we can swiftly adapt to market changes as they occur,” said Michael Hsing, CEO and founder of MPS.
Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ:MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.
Analog Semiconductors
Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales Growth
Monolithic Power Systems's revenue growth over the last three years has been very strong, averaging 32.1% annually. But as you can see below, its revenue declined from $460 million in the same quarter last year to $454 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a slow quarter for the company as its revenue dropped 1.3% year on year, in line with analysts' estimates. This could mean that the current downcycle is deepening.
Monolithic Power Systems may be headed for an upturn. Although the company is guiding for a year-on-year revenue decline of 0.9% next quarter, analysts are expecting revenue to grow 11.2% over the next 12 months.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Monolithic Power Systems's DIO came in at 172, which is 5 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Monolithic Power Systems's Q4 Results
It was good to see Monolithic Power Systems's strong revenue guidance for next quarter, which topped analysts' expectations. We were also happy its EPS narrowly outperformed Wall Street's estimates. On the other hand, its gross margin fell and its operating margin decreased. Overall, this was a decent quarter for Monolithic Power Systems. The stock is flat after reporting and currently trades at $645.41 per share.
So should you invest in Monolithic Power Systems right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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