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Monolithic Power (MPWR) Raises Third-Quarter Revenue Guidance

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Monolithic Power Systems, Inc. (MPWR - Free Report) recently revised its third-quarter of 2020 outlook for the revenues and margins. Markedly, the stock closed at $247.60, up 4.5% following the announcement on Sep 14.

The company now anticipates fiscal third-quarter revenue to be in the range of $257 million to $259 million (mid-point of $258 million) compared with the earlier guidance of $200-$210 million (mid-point of $205 million). It reflects an improvement of almost 26% considering mid-point level.

The Zacks Consensus Estimate for the third quarter is currently pegged at $205.2 million, which suggests an increase of 21.4% from third-quarter 2019 levels.

Per Monolithic Power, business significantly improved in the third quarter as it was able to quickly fulfil customers’ orders that were earlier marred by capacity constraints stemming from the coronavirus crisis.
Moreover, on account of recent trade policy amendment, many China-based clients pulled the shipment dates in to the third quarter, thereby driving the top line.

On a year-to-date basis, shares of Monolithic Power have rallied 39% compared with the industry’s growth of 1.8%.

Outlook for Other Metrics

Monolithic Power now expects non-GAAP gross margin in the band of 55.4-55.6% compared with the previous range of 55.5-56.1%.

Non-GAAP research and development (R&D) and selling, general and administrative (SG&A) expenses are projected in the range of $57.0-$58.0 million, up from the previous expectation of $50.2-$52.2 million.

Portfolio Strength Holds Promise

Monolithic Power is gaining from coronavirus crisis-led strong demand for cloud servers, storage and robust uptake of gaming consoles, and home applications.

Furthermore, Monolithic Power also benefitting from fast deployment of 5G network owing to its robust portfolio of wireless applications, legacy routers, and 5G networking infrastructure related products.

In fact, for the second quarter, Consumer and Communication segments’ revenues improved 27.4% and 8% sequentially, respectively.

Moreover, the outbreak of the pandemic has created opportunities for the company in the medical devices vertical. Notably, the company has built a low-cost emergency ventilator based on an open-source MIT design to aid medical workers in their fight against the pandemic.

However, impact of coronavirus crisis-triggered shutdowns of major automotive OEMs is a headwind, at least in the near-term. In the second quarter of 2020, Automotive revenues were $17.8 million, down 23.7% from the previous quarter.

Nevertheless, management remains confident of its growth prospects in this sector once the sector starts recovering. The company boasts a strong automotive product portfolio that targets In-Car connectivity and infotainment, rapid adoption of LED lightings, and advanced driver assistance system (ADAS) in cars.

Zacks Rank & Stocks to Consider

Currently, Monolithic Power carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Lam Research Corporation (LRCX - Free Report) , Zoom Video Communications (ZM - Free Report) and Synaptics Incorporated (SYNA - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Lam Research Corporation, Zoom Video and Synaptics is currently pegged at 13.3%, 25% and 10%, respectively.

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