Monolithic Power Systems (NASDAQ:MPWR) Reports Q1 Results

Yahoo

01-05-2025

Power management chips maker Monolithic Power Systems (NASDAQ:MPWR) beat Wall Street's revenue expectations in Q1 CY2025, with sales up 39.2% year on year to $637.6 million. Guidance for next quarter's revenue was optimistic at $650 million at the midpoint, 2.3% above analysts' estimates. Its non-GAAP profit of $4.04 per share was 0.9% above analysts' consensus estimates.
Is now the time to buy Monolithic Power Systems? Find out in our full research report.
Revenue: $637.6 million vs analyst estimates of $633.3 million (39.2% year-on-year growth, 0.7% beat)
Adjusted EPS: $4.04 vs analyst estimates of $4.00 (0.9% beat)
Adjusted Operating Income: $221.5 million vs analyst estimates of $219.9 million (34.7% margin, 0.7% beat)
Revenue Guidance for Q2 CY2025 is $650 million at the midpoint, above analyst estimates of $635.7 million
Operating Margin: 26.5%, up from 20.9% in the same quarter last year
Free Cash Flow Margin: 40.2%, down from 50.7% in the same quarter last year
Market Capitalization: $28.39 billion
'Our proven, long-term growth strategy remains intact as we continue our transformation from being a chip-only, semiconductor supplier to a full service, silicon-based solutions provider,' said Michael Hsing, CEO and founder of MPS.
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.
A company's long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Monolithic Power Systems's sales grew at an incredible 29.6% compounded annual growth rate over the last five years. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers, a great starting point for our analysis. 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).
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Monolithic Power Systems's annualized revenue growth of 13.1% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.
This quarter, Monolithic Power Systems reported wonderful year-on-year revenue growth of 39.2%, and its $637.6 million of revenue exceeded Wall Street's estimates by 0.7%. Beyond the beat, this marks 5 straight quarters of growth, implying that Monolithic Power Systems is in the middle of its cycle - a typical upcycle generally lasts 8-10 quarters. Company management is currently guiding for a 28.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 11.8% over the next 12 months, similar to its two-year rate. Despite the slowdown, this projection is admirable and suggests the market sees success for its products and services.
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Days 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 NaN,
It was encouraging to see Monolithic Power Systems's revenue guidance for next quarter beat analysts' expectations. We were also happy its EPS narrowly outperformed Wall Street's estimates. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 5.3% to $570 immediately after reporting.
Should you buy the stock or not? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.