Stifel maintains Buy on Microchip stock, $60 price target

On Tuesday, Stifel analysts maintained their Buy rating and a $60.00 price target for Microchip Technology (NASDAQ:MCHP), a leading provider of microcontroller and analog semiconductors. According to InvestingPro data, the stock has seen a significant decline of over 34% in the past six months, though it’s currently trading at a relatively high P/E ratio of 82.8x. InvestingPro analysis suggests the stock is currently overvalued relative to its Fair Value. The firm anticipates that Microchip Technology could report its March quarter results in line with their revenue estimate of $960 million, which would represent a 6.4% decrease from the previous quarter. This expectation aligns with the company’s own pre-announcement during its Business Update call on March 3, 2025, where it hinted at a potential distribution bottom and solid net bookings trends in January and February.

Stifel also projected that Microchip Technology might guide for quarter-over-quarter growth in the June quarter, albeit with a possibility of conservatism against their current estimate of a 4.0% increase. This forecast is bolstered by recent commentary from peers in the semiconductor industry, such as Monolithic Power (NASDAQ:MPWR) Systems, NXP Semiconductors (NASDAQ:NXPI), ON Semiconductor (NASDAQ:ON), and Texas Instruments (NASDAQ:TXN), which have collectively guided for a similar growth rate for the June quarter, averaging 4.0% at their respective midpoints.

The analysts highlighted Microchip Technology’s execution of its nine-point Recovery Plan, which was detailed in the recent Business Update. The plan focuses on streamlining the business by resizing the manufacturing footprint, reducing days of inventory, and fostering more ROI-focused distributor relationships. InvestingPro data shows the company maintains strong liquidity with a current ratio of 2.25, suggesting adequate resources to execute its recovery strategy. Get access to 10+ additional exclusive InvestingPro Tips and comprehensive analysis through the Pro Research Report. Additionally, the company is pursuing renewed growth initiatives, which include Total (EPA:TTEF) System Solutions (TSS), capitalizing on Six Megatrends, deploying an AI Coding Assistant, and expanding its China-for-China strategy.

Stifel’s continued endorsement of Microchip stock is based on these strategic initiatives and the company’s potential to execute its recovery and growth plans effectively. The $60 price target reflects a 7.8x multiple on the firm’s CY26E EV/Sales estimate, indicating a positive outlook for the company’s financial performance in the coming year. InvestingPro reveals the company has raised its dividend for 13 consecutive years and maintained payments for 24 years, demonstrating strong shareholder commitment despite current market challenges. Analyst targets range from $35 to $70, with a consensus recommendation leaning towards Buy.

In other recent news, Microchip Technology has made several strategic announcements and product launches. The company has introduced new data center solutions to meet the increasing demands of artificial intelligence (AI), featuring high-speed connectivity, storage solutions, and power management tools. Additionally, Microchip has launched the MCPF1412 power module, designed to enhance power management for industrial automation and data center applications, offering a compact and efficient solution. The company also unveiled the PIC16F17576 microcontroller family, aimed at capturing and measuring volatile analog signals in power-sensitive applications, ideal for battery-operated devices.

Microchip has appointed Rick Cassidy from TSMC to its Board of Directors, bringing extensive experience from the semiconductor industry. In financial updates, Stifel analysts have reduced their price target for Microchip Technology from $80.00 to $60.00, while maintaining a Buy rating, citing an inventory correction and uncertain macroeconomic conditions. The analysts expect sequential revenue growth in the June quarter, despite the challenges. Microchip’s management is focused on reducing its Days of Inventory and has restructured Long-Term Agreements with foundry partners to mitigate shortfall penalties. These developments reflect Microchip’s ongoing efforts to streamline operations and improve financial performance.

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