On Tuesday, TD Cowen maintained a "Hold" rating on shares of Microchip Technology (NASDAQ:MCHP), while increasing the price target to $90 from $80. The adjustment comes in the wake of the company's guidance for the June quarter, which fell short of analyst expectations by approximately 7%.
Despite the lower-than-anticipated guidance, the firm acknowledged Microchip Technology's ability to preserve a gross margin of 60% and maintain strict operating expense control, even as sales saw a substantial year-over-year decline of over 45%.
The company is currently navigating through a significant market correction and is facing challenges in over-shipment. According to TD Cowen, while Microchip Technology's financial discipline is commendable, the prospects for a recovery remain uncertain. The analyst pointed out that the timing and scale of a potential rebound are difficult to predict at this stage.
Microchip Technology's valuation is based on an estimated Fiscal Year 2026 earnings per share, which when calculated at 25 times, suggests that the current stock price reflects a balanced risk/reward scenario. The firm's upward revision of the price target to $90 reflects this assessment.
The semiconductor industry has been experiencing a correction, with Microchip Technology being one of the companies working through the downturn. Despite the challenges, the company's operational performance in terms of gross margin and operating expense control is seen as a positive sign by the analyst.
In conclusion, TD Cowen's latest evaluation of Microchip Technology indicates a steady outlook with the new price target of $90, factoring in the company's efforts to manage expenses and maintain profitability amidst a challenging market environment.
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