Monolithic Power Systems (NASDAQ: NASDAQ:MPWR) received an updated price target from Rosenblatt, with the firm raising its target to $880 from the previous $800, while reiterating a Buy rating on the stock.
The adjustment, which came on Monday, reflects the analyst's expectations that the company will meet its second-quarter 2024 projections, driven by the momentum of its AI power modules used in Nvidia (NASDAQ:NVDA)'s Hopper and the new Blackwell platforms.
These gains are seen to balance with the company's performance in non-AI market segments such as industrial and automotive, which are believed to be reaching a bottom, said an analyst from Rosenblatt.
Rosenblatt anticipates that the guidance for the third quarter of 2024 will support a mid-single-digit sales growth dynamic, with potential for an upside due to AI-related strength. The analyst highlighted Monolithic Power Systems' advantage in the vertical power module configurations, which are becoming necessary due to next-generation accelerator and CPU platforms transitioning to over 700-watt power specifications.
This is an area where competitors reportedly struggle, whereas MPS excels, the analyst pointed out.
The ongoing product transitions among AI customers, involving models like B100, B200, GB200, X100, and others, are expected to help MPS maintain a higher market share. Additionally, the shift in data centers towards liquid cooling is increasing the complexity of rack-scale designs, necessitating more board-level power module efficiency.
The analyst sees this as beneficial for MPS, as it aligns with the company's roadmaps and status as an industry innovator.
The firm's new price target of $880 is based on a 40x multiple of the company's conservative 2026 earnings projections.
InvestingPro Insights
Monolithic Power Systems (NASDAQ:MPWR) has demonstrated a robust financial and operational performance, reflecting its strategic positioning in the market. According to recent data from InvestingPro, Monolithic Power Systems boasts a market capitalization of $40.0 billion and maintains a high P/E ratio of 94.87, which increases to 99.87 when adjusted for the last twelve months as of Q1 2024. This indicates that investors are willing to pay a premium for the company's earnings, likely due to its growth prospects and consistent performance.
InvestingPro Tips suggest that Monolithic Power Systems has a history of raising its dividend, doing so for the past 6 consecutive years, and has maintained dividend payments for 11 consecutive years. Additionally, 13 analysts have revised their earnings upwards for the upcoming period, signaling confidence in the company's future financial health. Furthermore, the company has achieved a strong return over the last year, with a 51.73% price total return, and its liquid assets exceed short-term obligations, indicating good liquidity management.
For readers looking to delve deeper into the company's financial health and future prospects, InvestingPro offers additional tips. There are 17 more InvestingPro Tips available for Monolithic Power Systems, which can be accessed through https://www.investing.com/pro/MPWR. Interested investors can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing a comprehensive analysis that could guide investment decisions.
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