Analysts Optimistic About Microchip Technology's Future Despite Challenging Quarter

Truist Securities's William Stein raised their price target on Microchip Technology (NASDAQ: MCHP) by 3.2% from $93 to $96 on 2024/05/07. The analyst maintained their Strong Buy rating on the stock.

Microchip Technology reported its Q4 and FY 2024 earnings on May 6, 2024. While the quarterly earnings were in line with expectations, the company's guidance for Q1 2025 fell below consensus estimates. Stein summarized the print as "yet another reset," but expressed optimism for better guidance in Q3 when Microchip Technology reports its Q2 2025 results. Truist Securities, despite expressing cyclical concerns on the company, remains constructive on the broader semiconductor cycle and Microchip Technology's execution.

For Q4 2024, Microchip Technology reported earnings per share (EPS) of $0.57, which met the Zacks Consensus Estimate but represented a 65.2% decline from Q4 2023's $1.64. The company's revenue for the quarter was $1.326 billion, down 40.6% from Q4 2023's $2.233 billion. In terms of the full fiscal year 2024, Microchip Technology reported EPS of $4.92, down from FY 2023's $6.02. The company's revenue for FY 2024 was $7.634 billion, down from FY 2023's $8.439 billion.

Looking ahead to Q1 2025, Microchip Technology's management guided for EPS of $0.48 to $0.56 and revenue of $1.22 billion to $1.26 billion. President and CEO Ganesh Moorthy acknowledged the major inventory correction experienced in FY 2024, which led to a 9.5% decline in revenue. However, Moorthy highlighted the company's resilient operating model and rapid adjustment to the adverse business environment, which enabled Microchip Technology to achieve a non-GAAP operating margin of 43.9%. Moorthy also emphasized the company's commitment to its capital return program and its goal of returning 100% of adjusted free cash flow to shareholders by the current fiscal year-end. Despite ongoing challenges, Microchip Technology remains focused on innovation and expanding its product portfolio to ensure it is well-prepared to capitalize on future opportunities.

In addition to Truist Securities's William Stein, other analysts also updated their ratings and price targets for Microchip Technology on May 7, 2024. Goldman Sachs's Toshiya Hari raised their price target by 14.3% from $77 to $88 and maintained a Hold rating on the stock. Piper Sandler's Harsh Kumar raised their price target by 12.5% from $80 to $90 and reiterated a Hold rating. Mizuho's Vijay Rakesh raised their price target by 3.7% from $82 to $85 and also maintained a Hold rating.

Currently, 76.9% of top-rated analysts rate Microchip Technology as a Strong Buy or Buy, while 23.1% see it as a Hold. No analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that Microchip Technology's upcoming year will deliver earnings per share (EPS) of $5.05. If the analysts' predictions hold true, Microchip Technology's next yearly EPS will be up by 16.3% on a year-over-year basis.

Since Microchip Technology's latest quarterly report on May 6, 2024, the stock price has declined by 1.8%. However, year-over-year, the stock is still up by 24%. During this period, Microchip Technology has slightly trailed the S&P 500, which has seen a 25.4% increase.

Truist Securities analyst William Stein, who raised the price target on Microchip Technology, is ranked in the top 1% out of 4,577 Wall Street analysts by WallStreetZen. Stein specializes in the Consumer Cyclical and Technology sectors and has an average return of 37.9% with a 77.5% win rate.

Microchip Technology Incorporated is a company that develops, manufactures, and sells smart, connected, and secure embedded control solutions. The company offers a range of microcontrollers for various applications, along with development tools and memory products. Additionally, Microchip Technology provides engineering services and manufacturing services, including wafer foundry and assembly. The company is headquartered in Chandler, Arizona.

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