Monolithic Power’s Fundamentals Are Strong and a Soft 2023 Doesn’t Deter Our Long-Term Conviction

We maintain our $562 fair value estimate for wide-moat Monolithic Power Systems after a good fourth quarter that met our expectations. We forecast growth deceleration in 2023 as MPS encounters softer demand, but note this still implies double-digit sales growth. MPS’ recent performance has been stupefying, tripling its top line in four years and expanding non-GAAP operating margin by 8%. The firm has gained meaningful share from larger and more established analog competitors, and we see these gains as sticky for MPS’ differentiated chips. We continue to be impressed with the company’s ability to ascend the value chain, even in difficult markets like automotive, while exerting operating leverage. The stock has run up 35% since the start of the year, but we still see modest upside for long-term investors.