On Monday, KeyBanc Capital Markets adjusted its financial outlook for shares of Monolithic Power Systems (NASDAQ:MPWR), reducing the price target to $700 from the previous $1,075. Despite this significant change, the firm maintains an Overweight rating on the company's stock.
The adjustment comes amid concerns that Monolithic Power Systems will face a notable decrease in market share for its products used in Blackwell due to challenges with the Hopper Power Management Integrated Circuit (PMIC).
Persistent overheating issues with the Hopper PMIC have led to expectations that Infineon (OTC:IFNNY) Technologies (IFX) will become the primary supplier for Blackwell, securing 60-70% of the supply, with Renesas Electronics Corporation expected to obtain secondary share.
Monolithic Power Systems is making efforts to requalify its products for future versions of Blackwell, specifically the Blackwell Ultra (GB300/B300), which is anticipated to launch in the second half of 2025. However, due to the current situation, KeyBanc has found it necessary to revise its estimates for Monolithic Power Systems' performance.
Despite the lowered price target and the potential short-term setbacks, KeyBanc remains optimistic about Monolithic Power Systems' long-term prospects. The firm believes that the market has already factored in much of the anticipated share loss. Furthermore, KeyBanc continues to view Monolithic Power Systems as a long-term beneficiary of the growing General Artificial Intelligence (GenAI) and datacenter sectors.
In other recent news, Monolithic Power Systems has been the subject of several analyst adjustments following significant developments. The company reported record third-quarter earnings of $620.1 million, a 30% year-over-year increase, driven primarily by gains in automotive, communication, and storage and compute segments.
Loop Capital upgraded the company's stock from Hold to Buy, maintaining a price target of $660, while Stifel upheld its Buy rating and $1,100 price target.
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 (TSX: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.
Wolfe Research maintained a Peerperform rating on Monolithic Power Systems, addressing concerns stemming from a competitor's report. Despite the potential competition from Renesas, Monolithic Power Systems is expected to see high single-digit percentage year-over-year growth in revenue from NVIDIA (NASDAQ:NVDA) in the calendar year 2025. These are the recent developments concerning Monolithic Power Systems.
InvestingPro Insights
Despite the recent challenges highlighted by KeyBanc Capital Markets, Monolithic Power Systems (NASDAQ:MPWR) continues to demonstrate financial resilience. According to InvestingPro data, the company's revenue grew by 30.59% in the most recent quarter, indicating strong market demand for its products. Additionally, MPWR boasts a healthy gross profit margin of 55.29% for the last twelve months, showcasing its ability to maintain profitability even in challenging market conditions.
InvestingPro Tips reveal that MPWR holds more cash than debt on its balance sheet, which provides financial flexibility as the company works to requalify its products for future Blackwell versions. This strong financial position is further supported by the fact that MPWR has maintained dividend payments for 11 consecutive years, with a current dividend yield of 0.87%.
While KeyBanc has lowered its price target, it's worth noting that the InvestingPro Fair Value for MPWR stands at $551.32, suggesting potential upside from the current price. Investors seeking a more comprehensive analysis can access 17 additional InvestingPro Tips for MPWR, offering deeper insights into the company's financial health and market position.
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