Overvaluation And Rising Costs Will Erode Semiconductor Margins

Analysts have raised their price target for Monolithic Power Systems by over $110 to approximately $979. They cite strong enterprise data momentum, an expanded share in key markets, and increased confidence in the company's growth trajectory through 2027.

Analyst Commentary

Recent analyst notes highlight growing optimism surrounding Monolithic Power Systems, underpinned by multiple positive catalysts. However, some caution remains as analysts evaluate the company's future performance and valuation.

• Several analysts have raised their price targets significantly, reflecting increased conviction in Monolithic's outsized growth potential through diversified end markets.
• Bullish analysts point to robust execution in the company's Enterprise Data business group, with revenue surging over recent years and continued expansion expected in FY25.
• Product and customer ramps are supporting anticipated double-digit revenue growth, particularly in Enterprise Data and Automotive segments.
• The company is seen as a frontrunner in key supply relationships, winning additional share in critical platforms despite supply chain constraints impacting competitors.

• Some caution remains around valuation, as shares trade at elevated multiples relative to sector peers.
• Analysts note a possible decline in Enterprise Data revenue in 2025, with company outlooks indicating a contraction, although less severe than previously expected.
• Prospects for further upside are partly tied to successful execution on new product introductions and continued market share gains, which introduces operational risk.
• There is uncertainty in the scale and pace of growth beyond 2026, particularly as core segments mature and macroeconomic variables shift.

What's in the News

• Reed Semiconductor Corp. has filed a patent infringement lawsuit against Monolithic Power Systems, alleging improper use of technology in several MPS product families and claiming bad-faith interference with Reed's business relationships (Lawsuits & Legal Issues).
• From April to June 2025, Monolithic Power Systems completed a share buyback of 4,000 shares for $2.71 million, under its previously announced repurchase plan (Buyback Tranche Update).
• Monolithic Power Systems issued new financial guidance for Q3 2025, forecasting revenue between $710 million and $730 million, with a GAAP gross margin between 54.9% and 55.5% (Corporate Guidance, New/Confirmed).
• MPS has entered a strategic cooperation agreement with ECARX Holdings Inc. to advance collaboration in automotive intelligence, robotics, and AI. The partnership aims to accelerate global supply chain improvements and product rollout (Strategic Alliances).

Valuation Changes

• Consensus Analyst Price Target has increased from $867 to approximately $979, reflecting a more optimistic outlook on the company's future performance.
• Discount Rate has decreased slightly from 10.08% to 10.04%, suggesting analysts see marginally less perceived risk in the company's forecast.
• Revenue Growth projection has risen modestly from 15.66% to 15.91%, indicating expectations for stronger top-line expansion.
• Net Profit Margin estimate has edged down from 25.54% to 25.46%, showing a minor tempering of profitability expectations.
• Future P/E (price-to-earnings) ratio forecast has grown from 51.8x to 58.2x, which marks a notable rise in valuation multiples applied to anticipated earnings.