It has been about a month since the last earnings report for Monolithic Power (MPWR). Shares have lost about 3.5% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Monolithic Power Q4 Earnings Top Estimates, Revenues Meet
Monolithic Power reported healthy fourth-quarter 2022 results, with the bottom line beating the Zacks Consensus Estimate and the top line meeting the same. The Kirkland, Washington-based company reported higher revenues year over year due to persistently strong demand in most of its business categories. However, higher inventory levels and changing market conditions remain a concern for the company.
On a GAAP basis, net income rose to $119.1 million or $2.45 per share from $72.7 million or $1.51 per share in the prior-year quarter. Despite higher operating expenditures and greater income tax expenses, a solid top-line performance ensured net income improvement.
Non-GAAP net income was $154 million or $3.17 per share compared with $ 102.1 million or $2.12 per share in the year-ago quarter. The bottom line surpassed Consensus Estimate by 4 cents.
For 2022, net income stands at $437.7 million or $9.05 per share compared with $242 million or $5.05 per share in 2021. Excluding stock-based compensation of $161 million, non-GAAP net income stands at $599.9 million or $12.41 per share; this is 68.2% higher than the 2021 figure of $356.7 million or $7.45 per share.
Quarterly revenues for Monolithic Power increased to $460 million, up 36.7% from $336.5 million in the year-ago period. The top line matched the Zacks Consensus Estimate. All of the company's segments experienced strong growth during the fourth quarter, with the exception of the Consumer business, which had little impact on top-line performance.
For 2022, the company experienced a 48.5% top-line expansion, with net sales increasing to $1,794.1 million from $1,207.8 million in 2021.
In the fourth quarter, Storage and Computing revenues rose to $120.8 million, up 55% from the prior-year quarter’s figure of $78 million. The performance was driven by an increase in sales of storage applications and enterprise notebook. Communication revenue grew 40.1% to $64.3 million from $45.9 million in the prior-year quarter. The upside was driven by sales growth of 5G and satellite communications infrastructure applications.
During the fourth quarter, Enterprise Data witnessed a staggering growth of 69% year over year. Revenues rose to $68.4 million from $40.5 million from the year-ago quarter’s levels. Top line expansion is due to greater sales of power management solutions for cloud-based CPU and GPU server applications. In the December quarter, revenues from the Automotive segment were up by a solid 72.8% year over year as the top line increased to $97.4 million compared with $56.4 million in the prior-year quarter. Sales growth of company’s highly integrated applications that support automated driver assistance systems is primary driver of top line expansion in this segment.
In the fourth quarter Industrial revenues grew by 13.3% year over year. It increased to $56.1 million from $49.5 million in the year-ago quarter. Greater sales in applications for smart meter and industrial automation push up the top line. Revenues from the Consumer segment witnessed a 20.1% decline year over year in the fourth quarter.
By product family, revenues in DC to DC surged 35.3% year over year to $432.5 million. In the fourth quarter, Lighting Control revenues increased to $27.5 million from $16.8 million in the previous year.
Non-GAAP gross margin expanded 60 basis points (bps) from the year-ago quarter’s level to 58.5%. This is primarily caused by a change in the sales mix that favors high-value greenfield products and operational efficiencies, which more than balance greater product input costs. Non-GAAP operating expenses were $94.8 million, up from $83 million in the prior-year quarter. Non-GAAP operating income rose 70.7% year over year to $174.1 million.
Cash Flow & Liquidity
As of Dec 31, 2022, cash and cash equivalents amounted to $288.6 million and $73.4 million in long-term liabilities compared with respective tallies of $189.3 million and $67.2 million in 2021.
MPWR remain cautious about near-term business conditions as its Q4 inventory is above target levels. In the face of changing market dynamics, the company will continue to invest in infrastructure to ensure long-term growth and commercial expansion. For the first quarter 2023, company projects revenues within the range of $440 million to $460 million. Non-GAAP gross margin is estimated between 57.7% and 58.3%. On a non-GAAP basis, research and development and selling, general and administrative expenditure is expected between $96.1 million to $98.1 million. Management expects interest income to be in the range of $1.8-$2.2 million and a non-GAAP tax rate of 12.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
Currently, Monolithic has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly 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.
Performance of an Industry Player
Monolithic belongs to the Zacks Semiconductor - Analog and Mixed industry. Another stock from the same industry, M/A-Com (MTSI), has gained 6.7% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
M/A-Com reported revenues of $180.1 million in the last reported quarter, representing a year-over-year change of +12.8%. EPS of $0.81 for the same period compares with $0.64 a year ago.
M/A-Com is expected to post earnings of $0.77 per share for the current quarter, representing a year-over-year change of +13.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.8%.
M/A-Com has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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