Strength Seen in Monolithic (MPWR): Can Its 23.4% Jump Turn into More Strength?

Monolithic Power MPWR shares rallied 23.4% in the last trading session to close at $561.84. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 20.2% loss over the past four weeks.

Monolithic has a strong growth opportunity due to its robust product portfolio that targets In-Car connectivity and infotainment, advanced driver assistance system (ADAS) and rapid adoption of LED lighting in cars and vehicles. Growing adoption of Cloud-based CPU server applications and server artificial intelligence applications across several industries, such as retail, finance and telecommunications, indicates continued growth for the company’s Enterprise Data segment. The expanding markets of home appliances, gaming, smart TVs, lighting, monitors and stereos are expected to drive growth in the Consumer segment. Monolithic has a strong presence in Asia, Europe and North America. It derived significant revenue from China. The U.S. Government recently announced its decision to suspend higher tariffs for most countries for 90 days except China. However, owing to its dependence on China, MPWR has not yet weathered the storm, but it is still considered a positive development. These factors are likely to have propelled the share price appreciation.

This chipmaker is expected to post quarterly earnings of $4 per share in its upcoming report, which represents a year-over-year change of +42.4%. Revenues are expected to be $632.18 million, up 38.1% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Monolithic, the consensus EPS estimate for the quarter has been revised 0.7% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on MPWR going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Monolithic is part of the Zacks Semiconductor - Analog and Mixed industry. Magnachip MX, another stock in the same industry, closed the last trading session 10.2% higher at $2.92. MX has returned -34.4% in the past month.

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This article originally published on Zacks Investment Research (zacks.com).

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