Wedbush Morgan Remains Upbeat On Monolithic Power (MPWRE)

Mar.31.06 | About: Monolithic Power (MPWR)

Wedbush Morgan analysts Craig Berger and James Schneider sent a note to clients regarding semiconductor producer Monolithic Power Systems (MPWRE) following the company's earnings report. Key points from their note:

* Monolithic Power reported its full Q4 financial statements with better than expected gross margins of 64% and a more favorable than expected patent settlement payout to Microsemi of $1.5 million for use of its CCFL patents, both near term positives for the stock.

* Q1 financial guidance was just a tick below consensus, but above our estimates, as restatement costs and startup costs for a new China manufacturing facility drive incremental, but non-recurring, Q1 expenses.

* We continue to expect Q2 revenues will increase noticeably versus Q1 as distributor revenues 'snap-back' towards market consumption levels, and as shipments seasonally ramp into notebook PCs and other back-to-school oriented devices.

* NASDAQ delisting overhang likely to be removed soon as filings now complete; we expect the firm's symbol to return to MPWR within one week.

* Microsemi settlement was favorable for MPS and should allow some breathing room for both lower legal expenses and P/E multiple expansion.

* Increasing 2006 EPS estimate from $0.60 to $0.62, 2007 EPS estimate from $1.20 to 1.25, and price target from $19 to $22 as higher taxes offset OpEx good news, and litigation settlement allows for multiple expansion.

MPWRE 1-yr chart: