Microchip Technology Faces Challenges Ahead of Q3 Earnings Report
Analysts Predict Significant Earnings Drop, But Optimism Remains
Arizona-based Microchip Technology Incorporated (MCHP) specializes in crafting smart and secure embedded control solutions across various sectors. This includes automotive, industrial, computing, and various types of connectivity. With a market capitalization of $30 billion, the company is set to unveil its fiscal Q3 earnings results on Thursday, February 6.
Analysts anticipate a profit of $0.22 per share, marking a substantial 78.2% decrease from the $1.01 per share earned in the same quarter last year. Notably, the company has consistently met or exceeded Wall Street’s earnings estimates over the past four quarters. In its previous quarter, MCHP reported an adjusted earnings per share (EPS) of $0.46, surpassing expectations by 7%.
Looking ahead to fiscal 2025, analysts project that MCHP will report an EPS of $1.32—an alarming 71.3% decline from the $4.60 reported in fiscal 2024. However, positive growth is expected in fiscal 2026, with a 56.1% year-over-year increase to an estimated $2.06 per share.
Over the past year, shares of Microchip Technology have dropped by 33.4%, considerably underperforming compared to the S&P 500 Index’s 22.1% gain and the Technology Select Sector SPDR Fund’s (XLK) 18.5% increase during the same period.
Following its Q2 earnings announcement on November 5, Microchip’s shares fell by 1.8%, despite reporting revenues of $1.2 billion and an adjusted EPS of $0.46, both figures exceeding expectations. However, these results reflect a stark decrease from the previous year’s performance, with adjusted earnings down 71.6% and revenue declining by 48.4%. The company faced difficulties primarily due to a significant drop in revenue within its industrial and automotive sectors, notably in Europe, alongside high inventory reserve charges that contributed to the decline, impacting investor sentiment.
Despite these setbacks, Microchip Technology is optimistic about a potential rebound. The company remains committed to efficiently managing its inventory and operating costs.
Wall Street’s outlook on Microchip Technology is cautiously optimistic, reflected in an overall “Moderate Buy” rating. Out of 22 analysts, 15 advocate a “Strong Buy,” one recommends a “Moderate Buy,” five suggest a “Hold,” and one recommends a “Moderate Sell.”
The current average price target for MCHP stands at $82.68, indicating a promising 45.7% upside potential based on its present valuation.
On the date of publication, Neharika Jain did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article serve informational purposes only. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
