Why Monolithic Power Systems Plunged Today

Shares of Monolithic Power Systems (NASDAQ: MPWR) plunged on Thursday, down 18.2% as of 1:39 p.m. ET.

The company reported earnings last night, and while reported results showed strong growth beating expectations, Monolithic's fourth-quarter outlook may have disappointed. Furthermore, the company received an ominous downgrade today.

A beat, but perhaps fleeting

In the third quarter, Monolithic reported revenue growth of 30.6% to $620.1 million, with earnings per share growing 31.8% to $4.08. Both figures handily beat analyst expectations.

However, Monolithic's forecast for fourth-quarter revenue only amounted to $610 million at the midpoint, implying a quarter-to-quarter drop.

While the muted fourth-quarter revenue outlook may be attributed to the delay in Nvidia Blackwell chips, Monolithic didn't have much room for error, as the stock had just about doubled over the past year, trading at over 100 times trailing earnings and 50 times forward earnings estimates going into the report.

Of note, Monolithic makes the semiconductor-based power solutions that go into a variety of growth markets, including data centers, automotive applications, and consumer and industrial electronics.

On the subject of the Nvidia chip, one Wall Street analyst downgraded the stock based on increasing competition for Nvidia systems. Rosenblatt's Hans Mosesmann downgraded Monolithic from buy to neutral on Thursday, citing the fact that Monolithic will likely cede some market share in the Blackwell module to competitors Infineon and Renesas in the future.

Monolithic is a name to watch on the sell-off

Thursday was a very bad day in general for semiconductor stocks, and at around $743 per share as of this writing, Monolithic trades well below even the lowest sell-side analyst price target of $880 today.

Certainly, it seems Monolithic's technology is well positioned, given the extreme power needs of AI data centers and electric vehicles. Therefore, investors should put this one on the watch list after the post-earnings swoon.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.