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On Thursday, Needham, a notable investment firm, revised its price target for Monolithic Power Systems (NASDAQ:MPWR), a leading semiconductor company. The firm has lowered the target to $600.00 from the previous $950.00 but has maintained a Buy rating on the stock. The adjustment reflects concerns about Monolithic Power Systems' share position on NVIDIA (NASDAQ:NVDA)'s Blackwell platform.
The analyst from Needham indicated that due to the uncertainty surrounding Monolithic Power Systems' involvement with NVIDIA's Blackwell platform, they have opted for a cautious approach. Consequently, all projected revenue from Blackwell has been excluded from their financial model. This conservative stance comes in light of signals from NVIDIA that suggest a swift transition to the Blackwell platform in the coming quarters, which is expected to result in a rapid decrease in Hopper volumes after the first quarter of 2025.
Furthermore, the investment firm has revised its expectations for Monolithic Power Systems' market share on the Hopper platform down to 50%. This decision is based on the belief that Renesas is emerging as a second source supplier. The new estimates are described as a "worst case" scenario for Monolithic Power Systems' potential earnings from its NVIDIA-related business.
Despite the lowered price target, Needham still sees potential catalysts that could benefit Monolithic Power Systems. The firm suggests that if Monolithic Power Systems manages to secure any share on the Blackwell platform or outperforms the conservative estimates with its broader business activities, there could be upside for investors.
In other recent news, Monolithic Power Systems reported record third-quarter earnings of $620.1 million, a 30% year-over-year increase, primarily due to gains in automotive, communication, and storage and compute segments. KeyBanc Capital Markets adjusted its financial outlook for the company, reducing the price target to $700 amidst concerns of market share loss in products used in Blackwell due to challenges with the Hopper Power Management Integrated Circuit (PMIC). However, KeyBanc remains optimistic about Monolithic Power Systems' long-term prospects in the General Artificial Intelligence and datacenter sectors.
Loop Capital upgraded shares of Monolithic Power Systems from Hold to Buy, maintaining a price target of $660.00, despite a notable 10% decline in the company's share price. The firm considers the market's reaction to concerns about Monolithic Power Systems' market share loss in power management integrated circuits for NVIDIA's artificial intelligence GPU systems as overblown.
Several other firms made adjustments to their ratings and price targets for Monolithic Power Systems. Deutsche Bank (ETR:DBKGn) kept its Buy rating with a $900.00 stock price target. TD Cowen and Needham reduced their price targets to $975 and $950, respectively, but maintained 'Buy' ratings. Rosenblatt downgraded the stock from 'Buy' to 'Neutral', with a price target of $880. Stifel upheld its Buy rating and $1,100 price target, dismissing rumors of cancellations or technical issues with orders from its largest AI customer. These are the recent developments concerning Monolithic Power Systems.
InvestingPro Insights
While Needham has adjusted its price target for Monolithic Power Systems (NASDAQ:MPWR), InvestingPro data offers additional context to the company's financial health and market position. Despite recent challenges, MPWR's revenue growth remains strong, with a 30.59% increase in the most recent quarter. The company also maintains a solid gross profit margin of 55.29% over the last twelve months, indicating efficient operations.
InvestingPro Tips highlight that MPWR holds more cash than debt on its balance sheet, suggesting financial stability even as it navigates uncertainties in its market position. Additionally, the company has raised its dividend for 6 consecutive years, demonstrating a commitment to shareholder returns despite market fluctuations.
However, investors should note that MPWR is trading at a high earnings multiple, with a P/E ratio of 62.25. This valuation may already factor in some of the growth expectations discussed in the article. The stock's recent performance aligns with Needham's cautious approach, as InvestingPro data shows a 36.59% decline in the past month and a 40.79% drop over the last three months.
For those seeking a more comprehensive analysis, InvestingPro offers 18 additional tips for MPWR, providing a deeper understanding of the company's financial position and market trends.
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