Stock Story -
Power management chips maker Monolithic Power Systems (NASDAQ:MPWR) reported Q2 CY2024 results topping analysts' expectations, with revenue up 15% year on year to $507.4 million. On top of that, next quarter's revenue guidance ($600 million at the midpoint) was surprisingly good and 9.7% above what analysts were expecting. It made a non-GAAP profit of $3.17 per share, improving from its profit of $2.82 per share in the same quarter last year.
Is now the time to buy Monolithic Power Systems? Find out by reading the original article on StockStory, it's free.
Monolithic Power Systems (MPWR) Q2 CY2024 Highlights:
- Revenue: $507.4 million vs analyst estimates of $490.6 million (3.4% beat)
- Adjusted Operating Income: $171 million vs analyst estimates of $166.1 million (3% beat)
- EPS (non-GAAP): $3.17 vs analyst estimates of $3.07 (3.3% beat)
- Revenue Guidance for Q3 CY2024 is $600 million at the midpoint, above analyst estimates of $546.9 million
- Gross Margin (GAAP): 55.3%, down from 56.1% in the same quarter last year
- Inventory Days Outstanding: 171, down from 175 in the previous quarter
- Market Capitalization: $42.01 billion
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 SemiconductorsDemand 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 GrowthMonolithic Power Systems's revenue growth over the last three years has been strong, averaging 24.2% annually. But as you can see below, this quarter wasn't particularly strong, with revenue growing from $441.1 million in the same quarter last year to $507.4 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).
Monolithic Power Systems had a decent quarter as its revenue grew 15% year on year, topping analysts' estimates by 3.4%. We believe the company is still in the early days of an upcycle, as this was just the second consecutive quarter of growth and a typical upcycle tends to last 8-10 quarters.
Monolithic Power Systems's management team believes its revenue growth will accelerate, guiding to 26.4% year-on-year growth next quarter. Wall Street expects the company to grow its revenue by 21.2% over the next 12 months.
Product Demand & Outstanding InventoryDays 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 171, which is 6 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.
Key Takeaways from Monolithic Power Systems's Q2 ResultsWe were impressed by Monolithic Power Systems's revenue guidance for next quarter, which blew past analysts' expectations. We were also excited its revenue outperformed Wall Street's estimates. Overall, we think this was still a really good quarter that should please shareholders. The stock traded up 8.1% to $850 immediately after reporting.
