Morgan Stanley analyst Joseph Moore has maintained a "hold" rating on Microchip Technology (MCHP, Financial) while lowering the price target from $53 to $39. Moore believes that market concerns about the semiconductor company are overstated. He highlights opportunities under the leadership of new CEO Steve Sanghi, who has a nine-point restructuring plan. However, Moore notes that the company needs to find a way to boost revenue while cutting costs, which may prove challenging.
Despite revenue headwinds, Moore thinks that concerns about Microchip's gross margins and balance sheet are exaggerated, presenting potential opportunities. He emphasizes that the biggest variable remains revenue growth, as a cyclical recovery could leverage earnings per share and alleviate balance sheet concerns.
Microchip faces significant hurdles, including increased micro-level competition, macroeconomic uncertainties, and the need to regain customer trust. Moore suggests that if macro uncertainties diminish, the microcontroller market could enter an upward cycle, potentially leading to an upgraded rating for Microchip.
On Monday, Microchip Technology's stock closed up 2.3% at $39.43, though it has fallen over 30% this year.
