Oppenheimer analyst Rick Schafer reiterated the Outperform rating on Monolithic Power Systems, Inc. (NASDAQ:MPWR), lowering the price target of $500 from $565.

The company will report its results after the market closes on Monday, October 30.

The analyst sees in-line 3Q/4Q results/outlook led by relative strength in AI and auto. 

Auto (24%) expected flattish in 3Q and 4Q, reflecting two delayed customer launches. 

Auto is still expected to be up 40% this year after doubling in 2022. Schafer expects order velocity to pick up in 1H24.

Schafer has '23 topline modeled up 1% to $1.8 billion as the broader cyclical correction weighs, with larger analog peers like TI tracking down >10% this year.

The analyst estimates AI servers up >30% this year, accounting for 15% of server volumes. 

MPS AI module solutions (~5x ASP multiplier) will make up 10% of sales this year, and 15% next, the analyst adds. Industrial likely remain soft through 4Q.

According to the analyst, a deep product pipeline and steady flow of design wins have steadily diversified MPWR away from traditional consumer products and into the communications, industrial, automotive, and networking markets.

The transition to BCD4 and BCD5 buoys gross margins and gives MPWR a sustainable cost advantage over the competition, the analyst notes.

MPWR sets up well to outperform the broader semiconductor market with both an improving margin profile and an accelerating topline outlook.

The analyst's CY23/ CY24E EPS of $11.69/$13.93 remain unchanged. Schafer introduced CY25E EPS of $16.67.

Price Action: MPWR shares are trading higher by 0.52% to $406.16 on the last check Friday.