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On Friday, Needham analysts adjusted their outlook on Microchip Technology (NASDAQ:MCHP), reducing the price target to $60 from the previous $85, while still retaining a Buy rating on the shares. The revision follows the company’s financial report, which aligned with its December forecast, and its guidance for the fiscal fourth quarter (March) that fell short of market expectations. Currently trading at $53.11, the stock is near its 52-week low of $51.37, with InvestingPro data showing five analysts recently revising their earnings estimates downward.
In a detailed note, Needham analysts outlined several key points from Microchip’s recent performance. They highlighted that the company’s next-generation (NG) gross margin is expected to face pressure for the next few quarters due to underutilization and associated capacity charges. These charges amounted to $42.7 million in the fiscal third quarter and are anticipated to rise in the upcoming quarter, with the gross margin predicted to decline by approximately 250 basis points from its current level of 60.32%. According to InvestingPro, the company has maintained dividend payments for 23 consecutive years, with a current yield of 3.43%.
Additionally, Microchip’s management has reported ongoing weak demand across most of its end markets and products, which they attribute to high levels of inventory. Despite these challenges, the company has outlined a nine-point plan aimed at steering the business back towards growth.
Needham’s revised price target of $60 is based on 30 times their adjusted fiscal year 2027 non-GAAP (NG) earnings per share (EPS) estimate. The analysts’ maintained Buy rating indicates their belief in the stock’s potential despite the near-term headwinds faced by the company.
In other recent news, Microchip Technology has been the subject of multiple analyst adjustments. Mizuho (NYSE:MFG) Securities reduced the price target for Microchip shares to $58 from $72, citing a slightly missed revenue target of $1.03 billion for the December quarter and a projected 6% quarter-over-quarter decline in March quarter revenue. Citi analysts also revised their price target for Microchip, reducing it to $65, while maintaining a Buy rating, despite a 6% sequential sales decline.
Microchip Technology recently increased its quarterly cash dividend to 45.5 cents per share, continuing a trend of dividend increases since the third quarter of fiscal year 2003. This marks the 83rd increase in the company’s dividend, demonstrating a commitment to delivering value to shareholders.
In terms of board appointments, Microchip has added Victor Peng, former President of Advanced Micro Devices (NASDAQ:AMD), to its Board of Directors. Peng’s extensive industry experience is expected to contribute significantly to Microchip’s strategic direction.
Microchip also recently reported its financial outcomes for the third quarter of the fiscal year 2025, although specific performance figures were not disclosed in the past articles provided. These are recent developments that continue to shape the trajectory of Microchip Technology.
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