/Microchip%20Technology%2C%20Inc_%20HQ%20sign-by%20Michael%20Vi%20via%20Shutterstock.jpg)
Chandler, Arizona-based Microchip Technology Incorporated (MCHP) develops, manufactures, and sells smart, connected, and secure embedded control solutions. With a market cap of $40.1 billion, the company's operations span various countries in the Americas, Europe, and Asia.
The semiconductor giant has significantly underperformed the broader market over the past year. Over the past 52 weeks, MCHP stock is down 15.1% compared to the S&P 500 Index’s ($SPX) 15.1% returns. In 2024 alone, MCHP stock dipped 20.2%, while SPX returned 9% on a YTD basis.
MCHP has also lagged behind the Nasdaq Semiconductor ETF’s (FTXL) 10.6% returns over the past 52 weeks and a 1.4% dip in 2024.
MCHP stock fell by 5% after the company's Q1 earnings release on Aug. 1. The company reported a massive drop in revenues and profits. Its net sales dipped 45.8% annually to $1.2 billion, and its net income plummeted by 80.6% to $129.3 million. MCHP’s dip got even worse with a 10.6% drop in share prices on Aug. 2, which can partly be attributed to the havoc created by the release of unemployment data by the Bureau of Labor Statistics.
For the current fiscal year, ending in March 2025, analysts expect Microchip Technology's EPS to decline 50.2% annually to $2.29. The company’s earnings surprise history is mixed. It beat or matched the consensus estimate in three of the past four quarters while missing the forecasts on one other occasion. Its EPS for the last reported quarter surpassed the consensus estimates by 2.2%.
Among the 22 analysts covering the MCHP stock, the consensus rating is a “Moderate Buy,” a step down from “Strong Buy” a month ago. That’s based on 14 “Strong Buy” ratings, one “Moderate Buy,” and seven “Holds.”
This configuration is slightly less bullish than a month ago, with 16 analysts recommending a “Strong Buy.”
On Aug. 2, Needham analyst Quinn Bolton maintained a “Buy” rating and reduced the price target to $96. Despite ongoing lower guidance, revenue declines, and reduced margins, Bolton believes the worst of the downturn is factored in and anticipates a recovery starting in the second half of 2024. He considers current challenges temporary and expects long-term growth, reflected in his adjusted price target.
MCHP’s mean price target of $96.76 represents a premium of 34.4% to current price levels. The Street-high target of $110 indicates a potential upside of 52.8%.
On the date of publication, Aditya Sarawgi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
