Buy MPWR and MCHP With Solid Short-Term Price and Long-Term EPS Upside

The chart below shows the price performance of our two picks year to date. 

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Monolithic Power Systems Inc.

Monolithic Power Systems continues to benefit from rising demand for power management solutions tied to AI infrastructure and cloud computing deployments. MPWR also continues to broaden its addressable market through targeted technology acquisitions and product portfolio expansion. 

Second-quarter 2026 Enterprise Data revenues increased 164.3% year over year and 44.8% sequentially due to higher sales for AI and server applications. Automotive remains a long-term growth driver as semiconductor content rises across ADAS, infotainment and connectivity applications. Beyond automotive, MPWR is broadening its exposure to robotics, building automation and portable AI devices.

MPWR highlighted that its monolithic power architecture enables single-piece silicon solutions versus multi-chip competitor approaches in AI and high-density applications. The company extended its capacity target significantly beyond $6 billion to support future growth and its transition from a chip supplier to a full solutions provider. 

Currently, Monolithic Power Systems sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Strong Outlook

MPWR projected third-quarter 2026 revenues within the range of $1,140 million to $1,160 million. GAAP gross margin in the range of 55.2% to 55.8% and Non-GAAP gross margin in the range of 55.4% to 56.0%.

Solid Long-Term EPS Growth Rate 

Monolithic Power Systems has an expected revenue and earnings growth rate of 46.4% and 52.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 12.1% over the last seven days. 

MPWR has an expected revenue and earnings growth rate of 26.3% and 28.1%, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 16.3% over the last seven days. 

MPWR currently has a long-term EPS growth rate of 28%, well above the S&P 500’s long-term EPS growth rate of 18.2%.

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Reasonable Valuation

Despite an impressive northward journey this year, the MPWR stock still looks reasonably priced. It trades at a forward 12-month price-to-earnings (P/E) multiple of 49.62X, compared with the industry average of 38.70X.

Excellent Short-Term Price Upside

The short-term average price target of brokerage firms represents an increase of 35.7% from the last closing price of $1,359.08. The brokerage target price is currently in the range of $1,575-$2,100. This indicates a maximum upside of 54.5% and no downside. 

Microchip Technology Inc.

Zacks Rank #2 (Buy) Microchip Technology benefits from growing AI investments. The company’s Gen 4 and Gen 5 data center products are witnessing strong sales growth. MCHP’s new products are expected to gain traction with the launch of the industry's first 3-nanometer-based PCIe Gen 6 switch that powers modern AI infrastructure. 

These switches offer double bandwidth, lower latency, advanced security and high-density AI connectivity for next-generation cloud and data center performance. MCHP also entered the PCIe retimer market in the June 2026 quarter as a companion device for Gen6 switches, and disclosed an OEM design win that displaced a competitor. 

MCHP has expanded connectivity, storage and compute offerings for AI and data center applications, as well as intelligent power modules for AI at the edge. These factors are expected to drive top-line growth in the long term.

Strong Outlook

MCHP projected second-quarter fiscal 2027 revenues within the range of $1.589-$1.618 billion. Adjusted EPS is projected in the range of $0.91-$0.95. Operating income will be in the range of 38.5-39.5%.

Solid Long-Term EPS Growth Rate 

Microchip Technology has an expected revenue and earnings growth rate of 32.3% and 91.5%, respectively, for the current year (ending March 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 1.6% over the last 30 days. 

MCHP has an expected revenue and earnings growth rate of 18.2% and 27.9%, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 1% over the last 30 days. 

MCHP currently has a long-term EPS growth rate of 36.8%, well above the S&P 500’s long-term EPS growth rate of 18.2%.

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Attractive Valuation

MCHP is currently trading at an attractive valuation compared to its peers. The stock has forward price/earnings (P/E) of 24.80X, below the industry’s P/E of 38. It has a price/sale (P/S) of 8.96X, compared with the industry’s P/S of 9.66X. Moreover, it has a price/book (P/B) of 6.54X, lower than the industry’s P/B of 6.55X. 

Robust Short-Term Price Upside

The short-term average price target of brokerage firms represents an increase of 54.3% from the last closing price of $74.36. The brokerage target price is currently in the range of $88-$135. This indicates a maximum upside of 81.5% and no downside. 

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This article originally published on Zacks Investment Research (zacks.com).

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