Investing

Will This Little Known AI Company Split Its Stock Next?

John Seetoo

Published: July 17, 2024 9:25 am

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• Monolithic Power Systems has quietly exploded 500% over the past half decade with its essential power chips for digital devices.
• Monolithic Power’s stock price is within 150 points of $1,000.
• There are a number of justifications to warrant a forward stock-split announcement from Monolithic Power in 2024.

More Power in Smaller Packages

It’s safe to assume that Michael Hsing loves flying high. He is an avid pilot of acrobatic flying when not serving as CEO of Monolithic Power Systems, Inc. (NASDAQ: MPWR). As founder of Monolithic, he has steered it from a startup in 1997 to a 2004 IPO and a market price, at the time of this writing, soaring over $850. 

Monolithic Power Systems was founded on Hsing’s premise-turned-reality that an entire power system for a digital device could be reduced to a single chip. The company has grown  tremendously over the past five years, up over 500% at present. The explosion of AI, led by Nvidia’s graphics chips, has also boosted Monolithic Power’s prospects for the expanded demand for power chips, especially at data centers. With a stock price advancing towards $1,000 and a recently increased dividend, a strong case can be made for a forward stock split announcement from Monolithic Power Systems sometime in the not-so-distant future. 24/7 Wall Street has followed Monolithic Power Systems over the years and has published a number of past articles on the company. 

Based out of Kirkland, Washington, Monolithic Power currently has 18 different locations in the US, Asia, and in Europe. Its customers are primarily original equipment manufacturers, design manufacturers, and service providers. Its products provide control over voltage for electronics systems, wireless digital devices, and liquid crystal display screens,

The Leadoff Home Run and The Runaway Catalog

With his laserlike focus on maximization of power handling capacity while minimizing footprint to a single chip, Hsing would get off to a running start. Monolithic Power’s first product out of the gate was a home run, and the follow ups would add to the company’s image and reputation.

1998 saw the first single chip Notebook backlight CCFL chip released. This chip would quickly dominate with a market share of 40% by 2003, to 80% by 2005. The revenues generated would be the impetus for Monolithic Power to go public in 2004. Since then, Hsing has continued pushing the envelope, while expanding Monolithic Power’s catalog into nearly a thousand different models and more than 4,000 total products. Monolithic Power currently offers components for 14 different power management category application lines, with hundreds of subset chips and other items to address specific needs in each category:

• Switching Converters and Controllers – 592
• Digital Switching Regulators –  19
• LDO and Voltage Supervision – 61
• Power Management ICs – 61
• Power Over Ethernet – 16
• MOSFET Drivers – 11
• Power Modules – 122
• Multi Phase Controllers and Intelliphase – 45
• USB Power Supplies – 10
• Power Protection – 40
• Display Power and Control – 85
• USB, Load, and Analog Switches – 61
• Data Center – 84
• 48V. Data Center – 1

Follow The Money and Why A Split May Be In The Cards

Monolithic Power has a history of profitability, with positive revenue growth in 19 out of the last 20 years. The following factors are continuing to propel the stock price closer to $1,000, and are why a forward split announcement may be likely:

• Monolithic Power has beat analysts’ earnings per share estimates for every quarter since Q3 2020, making a streak of 15 in a row, with 16 at the end of July 2024 if the pattern holds true.
• Monolithic Power’s July 19 $840 call options are up +131.25%, while put options are down -75.65%, indicating extreme bullish market sentiment.
• The company has six “strong buy” recommendations from the following firms’ analysts: Keybanc, Oppenheimer, Needham, Wells Fargo, Truist Financial, and Stifel Nicolaus.
• Following the Nvidia (NASDAQ: NVDA) business model, Monolithic Power Systems outsources all of its fabrication and manufacturing to focus its resources on R&D, marketing, and sales. This drastically reduces the company’s manufacturing overhead and boosts profitability.
• Monolithic Power Systems is a Nvidia partner, providing its power supplies to Nvidia’s GPU chips, so its fortunes are attached at the hip to Nvidia’s.
• The proliferation of data centers has boosted demand for Monolithic Power’s products by as much as $150 million, or 200%, as of Q1 2024.
• Institutional buying in Monolithic Power has been robust. In the past two quarters, OFI Invest Asset Management, Arlington Trust Co. LLC, Turtle Creek Wealth Advisors, EverSource Wealth Advisors LLC, and Lindbrook Capital LLC have all increased their holdings in the stock. 
• Monolithic Power Systems recently hiked its dividend and has never undergone a stock-split in its history. The high stock price is a deterrent to retail investors who may have the desire, but lack the resources to acquire shares. A lower stock price would be buoyed by a bump in retail buying support.
• The connection with Nvidia, which also executed a forward stock-split recently, would likewise benefit Monolithic Power, which is becoming as synonymous with Nvidia as Charlie Munger with Warren Buffett.  

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