Why This Nvidia Partner's Stock Dropped 30% Recently—And Why Experts Still Recommend Buying
Monolithic Power Systems' shares have declined over 30% since October, yet leading analysts maintain a strong buy outlook due to expanding AI market opportunities and solid growth potential.
Key Points to Know
- Monolithic Power Systems' stock has fallen more than 30% since its last earnings release in late October.
- Concerns over flat Q4 revenue projections and potential reduced sales to Nvidia contributed to the decline.
- Analysts remain optimistic, highlighting growing AI-related demand and multiple growth drivers for future revenue boosts.
After peaking at record levels last year, Monolithic Power Systems (MPWR) shares have retreated significantly, dropping over 30% since their late October earnings announcement. Despite this, market experts continue to view the stock as a promising investment.
Recently, Deutsche Bank included Monolithic among its "top picks," labeling the recent price dip as an ideal buying opportunity. Analysts reaffirmed their "buy" rating with a price target near $900, anticipating revenue growth and margin improvements over the next two years.
Flat Q4 Outlook and Nvidia Sales Concerns Impact Stock
Although Monolithic exceeded earnings expectations in Q3, its forecast of nearly flat revenue for Q4 unsettled investors, causing a one-day 17% drop in share price. Further pressure came in November when reports suggested Nvidia might reduce component purchases for its Blackwell platform, a development previously seen as a growth catalyst.
Growing AI Market and Diverse Growth Drivers Support Optimism
Deutsche Bank analysts emphasize that even if Monolithic loses some Nvidia business, the expanding AI customer base should sustain strong growth. The company’s valuation, while on the higher side, is supported by consistent execution, above-industry growth rates, diverse revenue streams, and potential for margin expansion.
Out of 11 analysts monitored by Visible Alpha, 10 recommend buying Monolithic’s stock, with an average target price of $822.91—over 30% higher than the recent closing price of $625.82—indicating expectations of stock price recovery.
Monolithic Power Systems is set to announce its Q4 earnings after market close on February 6.
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