On Friday, Mizuho Securities revised its price target for Microchip Technology (NASDAQ:MCHP), a leading semiconductor company, to $95.00 from the previous $100.00. Despite this reduction, the firm maintains an Outperform rating on the stock.
The adjustment comes as the analyst predicts a lower revenue forecast for the December quarter, reducing the expectation from $1.21 billion and earnings per share (EPS) of $0.51 to $1.15 billion and EPS of $0.46. This new projection is slightly below the consensus of $1.20 billion in revenue and $0.48 EPS.
Looking further ahead, the firm also revised its fiscal year 2025 estimates (March year-end) for Microchip Technology, lowering revenue predictions from $4.93 billion to $4.80 billion and EPS from $2.10 to $1.97. This is in contrast to a consensus estimate of $4.85 billion in revenue and $1.98 EPS. For fiscal year 2026, the estimates have been adjusted from a revenue of $6.26 billion and EPS of $3.53 to $6.07 billion and EPS of $3.40, compared to the consensus of $6.00 billion in revenue and $3.30 EPS.
The firm also provided projections for fiscal year 2027, adjusting the revenue outlook from $7.18 billion and EPS of $4.65 to $7.06 billion and EPS of $4.42, which is still above the consensus estimate of $6.88 billion in revenue and $4.26 EPS.
The rationale behind maintaining an Outperform rating despite the lowered forecasts is based on the expectation that Microchip Technology will return to growth in fiscal year 2025 after experiencing multiple quarters of revenue weakness. The price target of $95 is justified by a 28.0 times forward earnings multiple for fiscal year 2026, which is above the semiconductor industry average of 22.7 times.
In other recent news, Microchip Technology Inc . reported a decrease in net sales for the first quarter of fiscal year 2025, totaling $1.241 billion, a 6.4% drop from the previous quarter. However, non-GAAP net income remained robust at $289.9 million, with earnings per diluted share of $0.53. Several analyst firms have revised their positions on Microchip Technology's stock.
Truist Securities downgraded the stock from Buy to Hold, adjusting the price target to $80 from the previous $89. Despite a cyber incident that disrupted operations, Citi maintains its Buy rating on the company, viewing the incident as temporary. Piper Sandler upgraded the company's stock from Neutral to Overweight, while Rosenblatt Securities adjusted the stock price target to $90, maintaining a Buy rating.
Microchip Technology expanded its Wi-Fi product line with 20 new products, aiming to support the growing needs of Industry 4.0, Artificial Intelligence, and IoT applications. The company also launched its 101765 family of Voltage-Controlled SAW Oscillators (VCSOs) designed for the aerospace and defense markets. In collaboration with Acacia Communications (NASDAQ:ACIA), Microchip Technology demonstrated a significant advancement in data center interconnectivity.
The company also announced its entry into the 64-bit embedded microprocessor market and released its Flashtec NVMe 5016 controller to enhance the performance and efficiency of data centers.
InvestingPro Insights
While Mizuho Securities maintains an Outperform rating on Microchip Technology (NASDAQ:MCHP) despite lowering its price target, recent InvestingPro data and tips provide additional context for investors.
According to InvestingPro data, Microchip's current P/E ratio stands at 30.25, which aligns with the 28.0 times forward earnings multiple used by Mizuho to justify their $95 price target. This valuation is supported by an InvestingPro Tip noting that MCHP is trading at a high Price / Book multiple, currently at 6.41.
Despite the anticipated revenue decline mentioned in the article, InvestingPro Tips highlight that Microchip has maintained dividend payments for 23 consecutive years and has even raised its dividend for 12 consecutive years. This demonstrates the company's commitment to shareholder returns, even in challenging market conditions. The current dividend yield is 2.37%, with a notable dividend growth of 18.54% over the last twelve months.
It's worth noting that InvestingPro offers 13 additional tips for Microchip Technology, providing a more comprehensive analysis for investors considering the stock's potential in light of the revised forecasts.
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