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Here's Why Monolithic Power (MPWR) Could be a Smart Bet

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Monolithic Power Systems MPWR is a stock that investors may consider adding to their portfolio to combat the highly-volatile market environment and gain from its upside potential. The company’s shares have appreciated 16.9% in the past year against the broader industry’s decline of 3%.

The company has a favorable combination of a Growth Score of B and a Zacks Rank #1 (Strong Buy). Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 (Buy) and a Growth Score of A or B offer solid investment opportunities.

It is trading way below its 52-week high and is now available at attractive valuations. The stock is down 28.2% from its 52-week high level of $580.00 reached on Nov 22, 2021, making it more affordable for investors.

The company has been witnessing northbound earnings estimate revisions as well. The Zacks Consensus Estimate for its 2022 earnings has witnessed an upward revision of 20.6% in the past 60 days to $11.61 per share. The consensus mark moved 22.6% north for 2023 earnings.

The company also has an impressive earnings surprise history, having topped estimates in the trailing four quarters, the average surprise being 8%. MPWR’s long-term earnings growth rate is pegged at an impressive 25%.

Monolithic Power Systems, Inc. Price

 

Monolithic Power Systems, Inc. Price
Monolithic Power Systems, Inc. Price

Monolithic Power Systems, Inc. price | Monolithic Power Systems, Inc. Quote

 

A prudent investor understands the importance of adding well-performing stocks to the portfolio at the right time. Thus, with such healthy fundamentals, this stock appears to be a smart investment pick.

Growth Drivers

Based in Kirkland, WA, Monolithic Power designs, develops and markets high-performance power solutions. The company focuses on the market for high-performance analog and mixed-signal integrated circuits (ICs). Monolithic Power’s products are widely utilized in industrial applications, telecommunication infrastructures, cloud computing, automotive and consumer applications.

Monolithic Power benefits from solid demand across the automotive, industrial, computing and storage and communications markets. The company is on track to expand capacity in 2022, well beyond $2 billion, which will ramp up new product revenues. It is likely to gain from the rapid deployment of 5G on the back of a robust portfolio of legacy routers, wireless applications and 5G networking infrastructure-related products. In automotive, the company is witnessing sales growth in infotainment, lighting and Advanced Driver Assistance Systems products.

Being a fabless company, Monolithic works with third-party contractors and chip assemblers to manufacture, assemble and test wafers and ICs. This approach permits the company to focus more on designing and developing process technology at a lower-fixed cost. However, unlike other fabless semiconductor companies, Monolithic installs its own proprietary process technologies in third-party contractors’ equipment and facilities. Monolithic claims that its proprietary process helps achieve a higher level of integration within its chips. As of Mar 31, 2022, Monolithic had $260 million in cash and cash equivalents with zero long-term debt.

For the second quarter, it projects revenues between $420 million and $440 million. Non-GAAP gross margin is expected to be between 58.7% and 59.3%.

Other Stocks to Consider

A few other top-ranked stocks from the broader technology sector worth consideration are InterDigital IDCC, Avnet AVT and Vishay Intertechnology VSH. While Avnet and InterDigital sport a Zacks Rank #1, Vishay Intertechnology carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.

Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 4.96%. Shares of VSH have declined 15.6% in the past year.

The Zacks Consensus Estimate for InterDigital 2022 earnings is pegged at $3.28 per share, up 5.1% in the past 60 days. IDCC’s long-term earnings growth rate is pegged at 15%.

InterDigital’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 141.1%. Shares of IDCC have lost 19.5% of their value in the past year.

The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.

Avnet’s earnings beat the Zacks Consensus Estimate in all of the last four quarters, the average being 21.22%. Shares of Avnet have grown 10.5% in the past year.


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