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Why Is Monolithic (MPWR) Up 12.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Monolithic Power (MPWR - Free Report) . Shares have added about 12.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Monolithic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Monolithic Power Q2 Earnings & Revenues Beat Estimates

Monolithic Power Systems reported second-quarter 2021 non-GAAP earnings of $1.81 per share, which beat the Zacks Consensus Estimate by 7.1%. The bottom line increased 67.6% on a year-over-year basis.

Revenues of $293.3 million rose 57.5% from the year-ago quarter’s figure and surpassed the Zacks Consensus Estimate by 4.5%. On a sequential basis, the top line surged 15.3%. The reported figure was also above the higher end of management’s guidance of $274-$286 million.

Strong demand across each of the segments, along with incremental investment in production capacity and a diversified multi-market strategy drove year-over-year growth.

Quarter in Detail

Revenues by Product Family

Revenues in the DC to DC segment (95.1% of total revenues) soared 58.3% year over year to $278.8 million. Lighting Control (4.9% of total revenues) revenues rallied 43.7% to $14.5 million.

Revenues by End Market

Computing & Storage (29.9% of total revenues) revenues increased 36.9% year over year to $87.7 million. The market’s robust performance was driven by increases in market share for servers, solid uptick in storage and high-end notebooks on growing clout of cloud computing.

Consumer (25.9%) revenues surged 59.7% from the year-ago quarter’s levels to $76.1 million, reflecting gains from continued demand for new gaming consoles.

Automotive (16.6%) revenues were $48.7 million, up 173.9% from the prior-year quarter’s figure. The company continued sales growth in infotainment products.

Industrial (14.8%) revenues surged 62.9% to $43.3 million, courtesy of higher sales of power source applications’ products.

Communications (12.8%) revenues advanced 24.5% to $37.5 million. The end-market gained from robust uptick in networking and wireless applications’ sales.

Margins in Detail

Non-GAAP gross margin expanded 60 basis points (bps) from the year-ago quarter’s level to 56.3% due to lower overhead costs. Management had predicted the figure between 55.5% and 56.1%.

Non-GAAP operating expenses amounted to $70.3 million during the reported quarter, up 38.8% year over year. As a percentage of revenues, the figure contracted 320 bps on a year-over-year basis to 24%.

Non-GAAP operating income climbed 79% year over year to $94.9 million. Non-GAAP operating margin (as a percentage of revenues) expanded 390 bps from the year-ago quarter’s level to 32.4%.

Balance Sheet & Cash Flow

As of Jun 30, 2021, cash, cash equivalents and investments were $672.9 million, compared with $641.6 million reported as of Mar 31, 2021.

Monolithic Power generated operating cash flow of $96.9 million compared with $77.1 million in the prior quarter. Capital spending totaled $39.3 million in the second quarter.

Guidance

For third-quarter 2021, the company projects revenues between $309 million and $321 million. Management anticipates non-GAAP gross margin between 57.6% and 58.2%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 12.06% due to these changes.

VGM Scores

At this time, Monolithic has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Monolithic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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