Key Takeaways
- Microchip Technology shares dropped in early trading Tuesday after the company lowered its outlook, citing weak demand due to economic conditions.
- However, shares rebounded later in the session as Jefferies analysts raised their price target on the stock and said it could benefit from an “Analog Renaissance.”
- Microchip Technology is set to report its latest quarterly earnings results on Feb. 1.
Microchip Technology (MCHP) shares rebounded from early losses Tuesday as Jefferies analysts raised their price target on the stock and said the maker of microcontroller and analog semiconductors could benefit from an “Analog Renaissance.”
Shares had declined in early trading after the company warned its latest quarterly results would fall short of its previous guidance, citing reduced demand due to economic conditions.
“The weakening economic environment that our customers and distributors faced during the December 2023 quarter resulted in many of them wanting to receive a lower level of shipments as they took actions to further de-risk their inventory positions,” Microchip Technology Chief Executive Officer (CEO) Ganesh Moorthy said in a release.
The company now anticipates revenue of around $1.76 billion in its fiscal third quarter ended Dec. 31, 2023, based on preliminary financial information. That would be a 22% drop from the previous quarter.
That decline is also steeper than Microchip Technology’s previous outlook, which indicated revenue would be down 15% to 20%, and consensus estimates compiled by VisibleAlpha. Microchip Technology is set to release its full results on Feb. 1.
Despite the lower guidance, Jefferies analysts raised their price target on the stock Tuesday to $100 from $90 and said they view “MCHP as a beneficiary of the Analog Renaissance, where we expect secular and cyclical tailwinds will benefit the group over the next 5 years.”
The analysts added the company could get a boost from the “4th Tectonic Shift in Computing,” which they described as a shift toward parallel processing and Internet of Things (IoT) applications, which could include research and development (R&D) “efforts dedicated to highly integrated analog design” as well as a “continued consolidation of analog industry.”
Microchip Technology shares were close to 1% higher at $86.41 per share as of about 2 p.m. ET Tuesday and have gained more than 17% over the past year.