UBS raises Microchip stock price target to $65, maintains Buy

On Friday, UBS analyst Timothy Arcuri updated the firm’s outlook on Microchip Technology (NASDAQ:MCHP), increasing the price target from $60.00 to $65.00 while sustaining a Buy rating on the shares. According to InvestingPro data, analyst targets for MCHP range from $50 to $75, with 15 analysts recently revising their earnings expectations upward for the upcoming period. Arcuri’s revision comes with an optimistic stance on the company’s revenue prospects, as Microchip Technology is expected to see benefits from channel normalization and a recovery in the Industrial sector.

Arcuri notes that the improved revenue outlook is somewhat tempered by anticipated increases in operating expenses, particularly due to the reinstatement of incentive compensation programs. These programs, along with core operating expense growth, are estimated to add $30-40 million per quarter to the company’s current operating expenses. The company maintains strong liquidity with a current ratio of 2.59, and InvestingPro analysis shows its liquid assets exceed short-term obligations.

Despite the expected rise in operating costs, UBS has slightly raised its CY26E earnings per share (EPS) estimates for Microchip Technology. The firm believes that the increased earnings from higher revenues will be balanced out by the heightened operating expenses. As a result, the price target has been adjusted upwards by $5.

In his commentary, Arcuri elaborated on the decision, stating, "We raise our estimates and take a little more optimistic view of out year revenue as MCHP starts to benefit from channel normalization and a recovery in Industrial." He also addressed the cost concerns, adding, "A lot of this, though, is offset by what we think will be steeper ramp in opex as it brings back incentive compensation programs which when layered on core opex growth, we estimate could add $30-40MM/Q to current opex levels."

While the price target for Microchip Technology has seen an uptick, UBS indicates that there may be more upside potential in peer stocks like TXN, hinting at a broader positive sentiment in the sector. The firm’s maintained Buy rating suggests confidence in Microchip Technology’s performance amidst the anticipated financial dynamics. Worth noting, the company has maintained dividend payments for 24 consecutive years, with a current dividend yield of 3.13%. For deeper insights into MCHP’s valuation and growth prospects, investors can access comprehensive analysis through InvestingPro, which offers detailed financial health scores and additional ProTips for informed decision-making.

In other recent news, Microchip Technology has reported fiscal fourth-quarter 2025 revenue of $970.5 million, slightly above Stifel’s estimate of $960.0 million. The company has provided an optimistic revenue forecast for the first quarter of fiscal 2026, with a midpoint guidance of $1.045 billion, surpassing both Stifel’s projection and the consensus estimate. Stifel analysts have raised their price target for Microchip to $70, maintaining a Buy rating, citing strong financial performance and a positive outlook. Meanwhile, Truist Securities has maintained a Hold rating with a $52 price target, acknowledging the company’s strengths but noting the current valuation already reflects significant recovery. TD Cowen has also adjusted its price target to $55, up from $35, while maintaining a Hold rating, highlighting Microchip’s inventory management and innovation focus as positive steps. Additionally, Microchip has introduced the MEC175xB family of quantum-resistant controllers, aligning with NSA guidelines for enhanced security measures. This launch is part of Microchip’s commitment to addressing potential quantum computing threats. These developments reflect Microchip’s strategic efforts in financial management and product innovation.

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