MICRO NODETimestamp: January 4, 2022

MPWR

Monolithic Power Systems

Power Semiconductor Crash

UNJUSTIFIED PANIC

SemiconductorsPower ManagementRate HikesAnalog

The Catalyst

“The crash of Monolithic Power Systems (MPWR) stock on January 4, 2022, was primarily triggered by broader market concerns over rising interest rates and their impact on high-growth tech stocks. The Federal Reserve signaled a more aggressive stance on monetary policy, causing a sell-off in the tech sector. Additionally, supply chain disruptions and fears of semiconductor shortages exacerbated the panic, leading to a significant decline in MPWR's stock price. **Macro Context:** 10Y Treasury Yield: 1.66%”

The Aftermath

“The thesis shifted as realized data stabilized and liquidity conditions normalized, undermining the worst-case assumptions embedded at the lows. As forced sellers exhausted and expectations reset, MPWR repriced higher with improving risk appetite and better forward visibility.”

Company Profile

Fundamental Overview (Current)

About

Monolithic Power Systems, Inc. is an American, publicly traded company headquartered in Kirkland, Washington. The company provides power circuits for systems found in cloud computing, telecom infrastructures, automotive, industrial applications and consumer applications.

Sector

TECHNOLOGY

Industry

SEMICONDUCTORS

Market Cap

$58.65B

P/E Ratio

94.37

Beta

1.46

Div Yield

0.53%

52W High

$1,250

52W Low

$436.42

Hindsight Engine

Normalization of Historical Volatility Clusters

Entry Delta

-44.2%

Recovery Alpha

+299.3%

Reference Peak

$540.49

Pre-Panic High

Panic Floor

$301.54

Moment of Capitulation

Drawdown Magnitude

-44.2%

Peak-to-Trough Delta

Alpha from Bottom

+299.317%

Total Return Delta

Macro Environment

Economic Indicators at Time of Event

Fed Funds Rate

0.08%

Inflation

8.00%

Unemployment

4.00%

10Y Treasury

1.66%

2Y Treasury

0.77%

30Y Treasury

2.07%

CPI

281.15%

Anatomy of the Crash

Sentiment Breakdown & Strategic Pivot Points

Stage 01: The Fear

At the stock's lowest point on October 14, 2022, sentiment was overwhelmingly negative. Headlines such as 'Tech Stocks Face Uncertain Future Amid Rate Hikes' from CNBC and 'Semiconductor Stocks Suffer as Supply Chain Woes Persist' from The Wall Street Journal reflected the pervasive fear. Analysts downgraded MPWR, citing concerns over its ability to maintain growth in a tightening economic environment.

Stage 02: The Turnaround

The turnaround for MPWR began as the company reported better-than-expected earnings, driven by robust demand for its power solutions in electric vehicles and data centers. Additionally, easing supply chain constraints and a stabilization in interest rate expectations helped restore investor confidence. A headline from Bloomberg, 'Monolithic Power Surges on Strong Earnings and Optimistic Outlook,' marked the beginning of the recovery.

Stage 03: Opportunity

The panic in MPWR's stock price presented a significant buying opportunity. Investors who bought at the panic low of $301.54 would have realized a gain of 299% by July 12, 2023, as the stock price recovered to $1,204.1. This event underscores the potential for substantial returns during periods of market overreaction and highlights the importance of long-term investment strategies.