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Why Is Monolithic (MPWR) Down 24.2% 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 lost about 24.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Monolithic due for a breakout? 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 Q1 Earnings In Line With Estimates

Monolithic Power reported first-quarter 2019 non-GAAP earnings of 84 cents per share which came in line with the Zacks Consensus Estimate. Notably, the figure improved 6.3% on a year-over-year basis.

Revenues of $141.36 million improved 9.5% from the year-ago quarter, coming within management’s guidance of $138-$144 million. The reported figure came marginally ahead of the Zacks Consensus Estimate of $141.16 million.

Sturdy demand in high-end consumer markets, including the likes of 5G based networking products, lighting and home appliances, aided year-over-year growth.

DC to DC segment (93.9% of total revenues) revenues increased 11.3% year over year to $132.7 million. However, Lighting Control (6.1% of total revenues) declined 12.4% to $8.7 million.

End-Market Highlights

Computing & Storage (27.7% of total revenues) revenues rose 26.5% to $39.2 million. Sales gain in GPU and data center servers, and high end notebooks aided performance.

Industrial (15.1%) revenues advanced 21.6% to $21.3 million, primarily on the back of increased adoption of industrial power supplies and security applications.

Automotive (14.5%) revenues were $20.5 million, up 15.7%. The upside can be attributed to higher product sales for applications in safety, infotainment and connectivity application products.

Communications (15.7%) revenues surged 40.8% to $22.2 million. Sturdy adoption of wireless gateway and 5G networking devices, and home router products drove year-over-year growth.

However, Consumer (27%) revenues declined 19.1% from the year-ago quarter to $38.1 million. The decline can be attributed to sluggishness in broad-based end-market.

Operating Details

Non-GAAP gross margin contracted 30 bps from the year-ago quarter to 55.6%, primarily owing to unfavorable business mix. Management had predicted the figure in the range of 55.3-55.9%.

Non-GAAP operating expenses were $39 million during the reported quarter, up 11.5% on a year-over-year basis.

Non-GAAP operating income grew 6.4% year over year to $39.6 million. Non-GAAP operating margin (as a percentage of revenues) contracted 80 bps from the year-ago quarter to 30.4%.

Balance Sheet & Cash Flow

Cash, cash equivalents and short-term investments were $359 million at the end of the first quarter, up from $377.3 million reported at the end of the previous quarter.

Monolithic Power generated operating cash flow of approximately $38.8 million compared with $47.6 million reported in the previous quarter.

Guidance

For the second quarter of 2019, Monolithic Power forecasts revenues in the range of $147.5 million to $153.5 million.

Management anticipates non-GAAP gross margin between 55.3% and 55.9%.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, Monolithic has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Monolithic has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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