In a recent analysis, B. Riley adjusted its expectations for Microchip Technology (MCHP, Financial), reducing the stock's price target from $75 to $60. Despite the downward revision, the firm maintains a Buy rating on the shares, reflecting continued confidence in the company's fundamentals.
This adjustment comes amid a broader outlook on the automotive and industrial sectors, which are anticipated to face significant challenges throughout the latter half of 2025. The analyst's concerns are driven by projections of decreased sales in key markets such as personal computers, smartphones, and automobiles for the coming year.
The lowered expectations highlight the potential impacts of a difficult macroeconomic environment on Microchip's performance, suggesting that investors might need to brace for a more subdued growth outlook in these pivotal sectors.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 21 analysts, the average target price for Microchip Technology Inc (MCHP, Financial) is $60.00 with a high estimate of $75.00 and a low estimate of $35.00. The average target implies an upside of 35.42% from the current price of $44.31. More detailed estimate data can be found on the Microchip Technology Inc (MCHP) Forecast page.
Based on the consensus recommendation from 24 brokerage firms, Microchip Technology Inc's (MCHP, Financial) average brokerage recommendation is currently 2.1, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Microchip Technology Inc (MCHP, Financial) in one year is $47.41, suggesting a upside of 7.01% from the current price of $44.305. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Microchip Technology Inc (MCHP) Summary page.
MCHP Key Business Developments
Release Date: February 06, 2025
- Net Sales: $1.026 billion, down 11.8% sequentially.
- Non-GAAP Gross Margin: 55.4%, including $42.7 million in capacity and utilization charges.
- Operating Expenses: 34.9% of net sales.
- Operating Margin: 20.5% on a non-GAAP basis.
- Non-GAAP Net Income: $107.3 million.
- Non-GAAP Earnings Per Share: $0.20.
- GAAP Gross Margin: 54.7%.
- GAAP Net Loss: $53.6 million, resulting in a loss per share of $0.10.
- Cash Flow from Operating Activities: $271.5 million.
- Adjusted Free Cash Flow: $244.6 million.
- Inventory: $1.356 billion, 266 days of inventory.
- Cash and Total Investment Position: $586 million.
- Capital Expenditures: $81 million in the December quarter.
- Adjusted EBITDA: $274.9 million, 26.8% of net sales.
- Net Debt to Adjusted EBITDA: 3.78 at December 31, 2024.
- Guidance for March Quarter Net Sales: Between $920 million and $1 billion.
- Guidance for Non-GAAP Gross Margin: Between 52% and 54% of sales.
- Guidance for Non-GAAP Operating Profit: Between 11.5% and 16.3% of sales.
- Guidance for Non-GAAP Diluted EPS: Between $0.05 and $0.15.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Microchip Technology Inc (MCHP, Financial) has introduced a new generation of 64-bit RISC-V processors with advanced AI capabilities, which have received strong initial customer response.
- The company has expanded its Wi-Fi portfolio with 20 new products, enhancing secure wireless connectivity and accelerating time to market.
- Microchip Technology Inc (MCHP) achieved the highest level of space certification for its radiation-hardened chips, strengthening its position in critical space missions.
- The company is actively working on a nine-point plan to improve efficiency and performance, including resizing its manufacturing footprint and reducing inventory levels.
- Microchip Technology Inc (MCHP) is committed to maintaining strong customer relationships, focusing on the top 1,000 customers to enhance support and design opportunities.
Negative Points
- Net sales for the December quarter were down 11.8% sequentially and 41.9% year-over-year, indicating significant revenue challenges.
- The company is facing a high inventory level, with 266 days of inventory at the end of December 2024, well above the target of 130 to 150 days.
- Operating expenses increased in the December quarter and are expected to rise further, impacting profitability.
- Microchip Technology Inc (MCHP) is experiencing broad-based weakness across all major geographies and product lines, including microcontrollers and analog.
- The company has lowered its fulfillment margins for distributors, which may impact distributor relationships and sales incentives.
