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On Friday, Stifel analysts increased their price target for Microchip Technology (NASDAQ:MCHP) shares to $70.00, up from the prior target of $60.00, while reiterating a Buy rating on the stock. According to InvestingPro data, analyst targets for the stock currently range from $44 to $75, with the stock trading near $55. While the company’s shares have declined over 31% in the past six months, InvestingPro analysis suggests the stock is slightly undervalued at current levels. The adjustment comes after Microchip reported fiscal fourth-quarter 2025 results that exceeded analysts’ expectations and provided an optimistic revenue forecast for the first quarter of fiscal 2026.
The company’s revenue for the fourth quarter was $970.5 million, a decrease of 5.4% quarter over quarter but 1.1% higher than Stifel’s estimate of $960.0 million. Looking ahead, Microchip’s midpoint revenue guidance for the first quarter of fiscal 2026 stands at $1.045 billion, marking a 7.7% sequential increase and 4.7% above Stifel’s projection of $998.4 million. InvestingPro data reveals the company maintains strong financial health with a current ratio of 2.59, indicating robust liquidity, and analysts expect the company to return to profitability this fiscal year. This forecast also surpasses the consensus estimate of $980.0 million.
A significant highlight from the report was the book-to-bill (B/B) ratio, which climbed above 1.0 for the first time in nearly three years, reaching 1.07 in the March quarter. This ratio is a key indicator of demand, with values above 1.0 suggesting that more orders were received than filled, indicating potential revenue growth.
Microchip’s management also provided updates on the company’s Nine Point Recovery Plan, which was initially disclosed on March 3, 2025. The plan is designed to drive improvements across various aspects of the business, and the recent progress reflects positively on the company’s direction and long-term health.
In their commentary, Stifel analysts expressed confidence in Microchip’s trajectory, citing swift execution of meaningful changes that are expected to have immediate and long-term positive effects. The raised 12-month price target of $70 is reflective of higher estimates and increased conviction in the stock’s potential upside, with a valuation pegged at 8.7 times the CY26E EV/Sales. InvestingPro subscribers can access 8 additional exclusive ProTips about Microchip, including insights about its 13-year dividend growth streak and comprehensive financial health analysis. Discover the full potential of your investments with InvestingPro’s detailed Research Reports, available for over 1,400 US stocks including Microchip Technology.
In other recent news, Microchip Technology reported Q4 FY2025 earnings that exceeded expectations, with an earnings per share (EPS) of $0.11, surpassing the forecasted $0.10. The company also reported revenue of $970.5 million, slightly above the anticipated $962.76 million. Piper Sandler maintained its positive stance on Microchip, keeping an Overweight rating and a $65 price target, citing a solid quarter and improving metrics such as book-to-bill ratios and sales growth. Truist Securities raised its price target for Microchip to $52, acknowledging the company’s positive earnings performance but remaining cautious due to valuation concerns. TD Cowen also increased its price target for Microchip to $55, highlighting the company’s efforts to reduce inventory and focus on innovation. These recent developments suggest that Microchip Technology is experiencing a potential recovery, with analysts noting improvements in inventory management and product innovation. However, concerns about the macroeconomic environment and stock valuation remain.
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