MPS Growth Acceleration Reflects Disruptive Technology and Wide Moat, and We Raise Our FVE to $562

We modestly raise our fair value estimate for Monolithic Power Systems, or MPS, to $562 per share, from $540 previously, after second-quarter sales crushed guidance. MPS guided the third quarter roughly in line with our prior expectations, but we expect impressive results to continue through the end of 2022 and into 2023. MPS continues to gain traction in data center builds and mission-critical automotive sockets, and we view its share gains over the past few years as sticky. We aren’t overly worried about potential weakening in the broader semiconductor market for MPS, given its unique chip designs and low fixed capital base—both of which also underpin our wide economic moat rating. Shares rose after the print, but we continue to view MPS as undervalued.