MIPS AB: Q2-23 Thesis Tracking, Expected Soft Demand, Recovery in Q4
MIPS fell 15% to SEK 433/share after a soft Q2 results - but this was expected and as long-term thesis intact and share price meets my base case.
MIPS AB is a monopoly in bike helmet safety systems, a compounder in the making.
I am bullish on the long-term as MIPS has multiple enduring competitive advantages that will prove challenging for competitors to replicate. It has compounded revenue by 49% CAGR, earnings by 62% CAGR, and free cash flow per share by 39% CAGR since 2014.
The stock appears expensive on an absolute level but undervalued relative to historical levels, the uniqueness and dominance of the business, the size and trajectory of its moats, and growth potential.
On 20th July, It reported expected soft Q2’23 results (continuing the trend from challenging Q1’23 results). The company continued guiding a recovery in H2, but now they see a recovery in Q4 instead of Q3.
[…] Bike retailers in the key US and European markets continued to reduce their inventory levels during the period, as expected.
[…] We assess that the third quarter will continue to be challenging but expect to see a stronger fourth quarter…