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Why Is Monolithic (MPWR) Down 9.4% Since Last Earnings Report?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for Monolithic Power (MPWR). Shares have lost about 9.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Monolithic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Monolithic Power Q4 Earnings & Revenues Beat Estimates

Monolithic Power Systems, Inc. reported fourth-quarter 2020 non-GAAP earnings of $1.31 per share, which beat the Zacks Consensus Estimate by 5.65%. Notably, the bottom line surged 26% on a year-over-year basis.

Revenues of $233 million climbed 39.8% from the year-ago quarter’s figure and surpassed the Zacks Consensus Estimate by 3.22%. On a sequential basis, the top line declined 10.2%. The reported figure was also above the higher end of management’s guidance of $218-$230 million.

Strong demand across each of the end-markets, and a diversified multi-market strategy drove year-over-year growth.

Quarter in Details

Revenues by Product Family

Revenues in the DC to DC segment (94.4% of total revenues) climbed 39.6% year over year to $219.9 million. Moreover, Lighting Control (5.6% of total revenues) revenues improved 42.3% to $13.1 million.

Revenues by End Market

Computing & Storage (26% of total revenues) revenues increased 11.1% year over year to $61.8 million. The market’s solid performance was driven by broad-based sales strength, solid uptick in data center servers on growing clout of cloud computing, and storage, and high-end notebooks.

Consumer (28%) revenues rallied 69.7% from the year-ago quarter to $65.1 million, reflecting gains from solid uptake of wearables, gaming consoles, and home-focused IoT applications.

Industrial (16%) revenues surged 38.8% to $37.1 million courtesy of strong performance of power devices.

Automotive (17%) revenues were $39.4 million, up 63.1% from the prior-year figure. Normalizing order levels following easing of coronavirus crisis-induced shutdowns of major automotive OEMs led to improvement in business. The company has won design deals in infotainment, smart lighting, ADAS, which is expected to boost performance in the quarters ahead.

Communications (13%) revenues advanced 35.6% to $29.7 million. The end-market benefited from infrastructure-based production ramp up.

Margins in Detail

Non-GAAP gross margin expanded 20 basis points (bps) from the year-ago quarter’s level to 55.7%. Management had predicted the figure between 55.4% and 56%.

Non-GAAP operating expenses amounted to $63.6 million during the reported quarter, up 52.3% year over year. As a percentage of revenues, the figure expanded 230 bps on a year-over-year basis to 27.3%.

Non-GAAP operating income improved 30.5% year over year to $66.3 million. Non-GAAP operating margin (as a percentage of revenues) contracted 200 bps from the year-ago quarter’s level to 28.4%.

Balance Sheet & Cash Flow

As of Dec 31, 2020, cash, cash equivalents and short-term investments were $598 million, compared with $551.5 million reported as of Sep 30, 2020.

Monolithic Power generated operating cash flow of $79.6 million compared with $77.4 million in the prior quarter.

Q1 Guidance

For first-quarter 2021, the company projects revenues between $236 million and $248 million. Management anticipates non-GAAP gross margin between 55.4% and 56%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 13.47% due to these changes.

VGM Scores

Currently, Monolithic has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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