On Monday, Needham reiterated a Buy rating on Monolithic Power Systems (NASDAQ:MPWR), maintaining a price target of $950.00. The firm addressed concerns raised by a report from Edgewater Research suggesting Monolithic Power Systems might be experiencing technical issues with its power management solutions for high-wattage processors. The report indicated that the company could be replaced by competitors Renesas and Infineon (OTC:IFNNY) on certain GPU models.
Monolithic Power Systems management has countered these claims, stating they are not aware of any technical problems that would hinder their solutions from being used in Blackwell systems. The company also emphasized that their multi-phase controllers and voltage regulators could be used interchangeably between Hopper and Blackwell systems, dismissing concerns over the compatibility and performance of their products.
Despite the reassurance from Monolithic Power Systems' management, Needham acknowledged that the company's market share at NVIDIA (NASDAQ:NVDA) could potentially drop below the previously anticipated 70% mark over the next one to two years. However, Needham believes that the current market valuation of Monolithic Power Systems has already factored in a significant loss of market share on the Blackwell project.
The firm suggests that if Monolithic Power Systems' management can provide further clarity on their market share position with Blackwell, it could lead to an increase in the company's stock value. Needham's stance remains positive, reflecting confidence in Monolithic Power Systems' market positioning and the potential for a rebound in share price.
In other recent news, Monolithic Power Systems reported record third-quarter earnings of $620.1 million, a 30% year-over-year increase, predominantly driven by gains in the automotive, communication, and storage and compute segments. Despite concerns about potential market share losses to competitors Renesas and Infineon, Deutsche Bank (ETR:DBKGn) maintained its Buy rating and $900.00 stock price target for the company.
TD Cowen, Needham, and Rosenblatt Securities have also adjusted their positions on Monolithic Power. TD Cowen reduced its price target to $975 while maintaining a 'Buy' rating, and Needham also reduced its price target to $950, keeping a 'Buy' rating. Rosenblatt downgraded the stock from 'Buy' to 'Neutral', maintaining a price target of $880.
Recent developments suggest that despite potential competition from Renesas, Monolithic Power Systems is expected to see high single-digit percentage year-over-year growth in revenue from NVIDIA in the calendar year 2025. This projection takes into account content growth, unit growth, and an estimated 30% market share loss to Renesas.
InvestingPro Insights
To complement Needham's analysis of Monolithic Power Systems (MPWR), InvestingPro data provides additional context for investors. Despite recent concerns, MPWR's financials show strength in several areas. The company's revenue growth of 30.59% in the most recent quarter demonstrates robust demand for its products. Moreover, MPWR boasts a healthy gross profit margin of 55.29% for the last twelve months, indicating efficient operations and pricing power.
InvestingPro Tips highlight that MPWR has raised its dividend for 6 consecutive years and maintains more cash than debt on its balance sheet. These factors suggest financial stability and a commitment to shareholder returns, which could be reassuring for investors in light of the recent market concerns.
However, it's worth noting that MPWR is trading at a high earnings multiple, with a P/E ratio of 70.84. This valuation may already reflect high growth expectations, aligning with Needham's observation that potential market share losses might already be priced in.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips on MPWR, providing a deeper understanding of the company's financial health and market position.
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