Shares of this Nvidia supplier down 30% in 3 months—here’s why Deutsche Bank says it’s still a buy

• Shares of Monolithic Power Systems have fallen more than 30% since its last earnings report in late October.

• The company’s fourth-quarter outlook and reports that its sales to Nvidia may fall have sent shares plummeting in the final months of the year.

• Analysts remained upbeat, citing the expansion of the AI-related potential customer market as a boost to revenues in the coming years.

After hitting record highs last year, shares of Monolithic Power Systems (MPWR) are down more than 30% since their last earnings report in late October, but analysts remain optimistic.

In a note earlier this week, Deutsche Bank analysts added Monolithic’s stock to their “top picks” list and called its recent decline a “buying opportunity.” Analysts reiterated their “buy” rating and $900 price target, citing likely revenue growth and margin improvement over the next two years as positive catalysts.

Monolithic beat estimates for third-quarter earnings, but the company’s forecast that revenue growth would be “roughly flat” in the fourth quarter rattled investors and sent its stock down 17% in one day.

Shares got another hit in November when a report suggested Nvidia (NVDA) was considering reducing the amount of components it buys from Monolithic for its Blackwell platform. Analysts had previously cited Blackwell as a positive catalyst for a monolithic stock.

Analysts at Deutsche Bank wrote that even if Monolithic loses share among Nvidia’s suppliers, the company should “continue to deliver solid AI-related growth” as the market for potential customers continues to expand.

While the company’s valuation is “at the high end of our comfort range,” analysts say it’s justified due to Monolithic’s “consistent execution, industry-leading growth, diversity of growth drivers and sustainable margin expansion potential.”

Ten of the 11 analysts tracked by Visible Alpha rate the hardware maker’s stock a “buy” rating, with one rating a “hold.” The average price target of $822.91 is more than 30% above Friday’s close of $625.82, suggesting analysts think the stock will recoup most of the ground lost since the third-quarter report.

Monolithic is scheduled to report its fourth quarter earnings after the bell on February 6th.

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