Shares of Monolithic Power Systems(NASDAQ: MPWR) plunged on Thursday, down 18.2% as of 1:39 p.m. ET.
The company reported earnings last night, and while reported results showed strong growth beating expectations, Monolithic's fourth-quarter outlook may have disappointed. Furthermore, the company received an ominous downgrade today.
A beat, but perhaps fleeting
In the third quarter, Monolithic reported revenue growth of 30.6% to $620.1 million, with earnings per share growing 31.8% to $4.08. Both figures handily beat analyst expectations.
However, Monolithic's forecast for fourth-quarter revenue only amounted to $610 million at the midpoint, implying a quarter-to-quarter drop.
While the muted fourth-quarter revenue outlook may be attributed to the delay in Nvidia Blackwell chips, Monolithic didn't have much room for error, as the stock had just about doubled over the past year, trading at over 100 times trailing earnings and 50 times forward earnings estimates going into the report.
Of note, Monolithic makes the semiconductor-based power solutions that go into a variety of growth markets, including data centers, automotive applications, and consumer and industrial electronics.
On the subject of the Nvidia chip, one Wall Street analyst downgraded the stock based on increasing competition for Nvidia systems. Rosenblatt's Hans Mosesmann downgraded Monolithic from buy to neutral on Thursday, citing the fact that Monolithic will likely cede some market share in the Blackwell module to competitors Infineon and Renesas in the future.
Monolithic is a name to watch on the sell-off
Thursday was a very bad day in general for semiconductor stocks, and at around $743 per share as of this writing, Monolithic trades well below even the lowest sell-side analyst price target of $880 today.
Certainly, it seems Monolithic's technology is well positioned, given the extreme power needs of AI data centers and electric vehicles. Therefore, investors should put this one on the watch list after the post-earnings swoon.
Should you invest $1,000 in Monolithic Power Systems right now?
Before you buy stock in Monolithic Power Systems, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Monolithic Power Systems wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $853,860!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 28, 2024
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.