EU and US could reach trade deal this weekend - Reuters
On Tuesday, Rosenblatt analysts reiterated their Buy rating and $70.00 price target for Microchip Technology (NASDAQ:MCHP) stock, which currently trades at a P/E ratio of 102.14 with a market capitalization of $31.17 billion. Following a Business Update Call with Microchip’s CEO Steve Sanghi, the analysts observed signs of improvement in the company’s performance. According to InvestingPro data, analyst targets range from $53 to $80, reflecting mixed sentiment about the company’s prospects. Sanghi discussed a 9-Point Recovery Plan aimed at stabilizing the company, which has not officially declared a bottom to the inventory correction but noted that revenue for the March quarter is on track with previous guidance, inventory levels are stabilizing, and bookings are on the rise.
The management’s introduction of a more sustainable long-term business model was highlighted by the analysts as a positive step. This model is backed by growth initiatives in Total (EPA:TTEF) System Solutions (TSS), megatrends, artificial intelligence, new product developments, and cost reduction strategies. InvestingPro analysis shows the company has maintained dividend payments for 24 consecutive years and raised dividends for 13 straight years, demonstrating long-term financial stability. Get access to 10+ additional exclusive ProTips and comprehensive analysis with an InvestingPro subscription. The Rosenblatt team has chosen to maintain their estimates until they receive more details on the timing of revenue growth and the reduction of cost of goods sold (COGS) and operating expenses (OpEx).
The analysts expressed confidence that Microchip’s management is taking the necessary actions to turn the business around and provide a fresh start for the company. The maintained Buy rating and $70 price target are based on applying a mid-twenties price-to-earnings (P/E) multiple to the firm’s projected fiscal year 2027 earnings per share (EPS).
Microchip Technology, a leading provider of microcontroller and analog semiconductors, has been navigating through an extended period of inventory adjustment, which has impacted the semiconductor industry. The company has experienced a significant revenue decline of 44.31% over the last twelve months, though it maintains strong liquidity with a current ratio of 2.25. The company’s recovery plan and the management’s efforts to implement a new business model are seen as steps towards achieving long-term growth and financial stability. Discover detailed insights and access the comprehensive Pro Research Report for MCHP, along with 1,400+ other stocks, exclusively on InvestingPro.
In other recent news, Microchip Technology has been the focus of several analyst updates and strategic shifts. The company announced plans to cut approximately 2,000 jobs, representing about 9% of its workforce, due to reduced demand from the automotive sector. This restructuring will incur costs between $30 million and $40 million, with layoffs expected to be completed by the end of the June quarter. Additionally, Microchip Technology will close its Arizona manufacturing facilities in May, earlier than previously planned.
Analysts have reacted to these developments with various adjustments to their outlooks. Evercore ISI raised its price target for Microchip Technology to $71, citing a turning point in the company’s cycle and improved net bookings. Mizuho (NYSE:MFG) Securities increased its price target to $68, highlighting the company’s strategic 9-point plan and restructuring efforts aimed at enhancing profit margins. Jefferies reiterated a Buy rating with a $70 price target, noting improved booking trends as a positive sign for the company’s performance.
Needham also raised its price target to $66, emphasizing improved bookings and a stabilizing backlog. The firm noted that Microchip Technology’s revised long-term operating model anticipates industry-plus revenue growth, despite a decrease in non-GAAP gross and operating margins. These updates reflect a generally optimistic view among analysts about Microchip Technology’s potential for growth and recovery amid industry challenges.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.