Microchip (MCHP) Hits New 52-Week High on Raised Guidance
Share price of Microchip Technology Inc. MCHP rallied to a new 52-week high of $86.88, eventually closing a tad bit lower at $86.86 on Jun 8.
The share price increase can be attributed to impressive fourth-quarter fiscal 2017 results and improved first-quarter fiscal 2018 guidance. Including stock-based compensation, the company reported earnings of $1.10 per share in the last quarter, which beat the Zacks Consensus Estimate by 11 cents.
Moreover, the company recently revised sales and earnings guidance for the first quarter of fiscal 2018. The company now forecasts non-GAAP net sales to be up in the range of 4.5–6% (mid-point at 5.25%) compared with the earlier guidance of 2–7% up (mid-point at 4.5%) on a sequential basis. Net sales are anticipated to increase 12.6% from the year-ago quarter.
Non-GAAP earnings are now expected to be in the range of $1.22–$1.26 per share, compared with the previous guided range of $1.17–$1.27 per share.
We note that Microchip has outperformed the S&P 500 market on a year-to-date basis. While the index gained 10.3%, the stock returned 35.8% over the same period.
Currently, Microchip has a Zacks Rank #2 (Buy). The stock has a market capital of $19.9 billion.
Key Factors
As evident from its fourth-quarter fiscal 2017 results, Microchip is benefiting from the addition of Atmel’s product portfolio, which it acquired in Apr 2016.
The microcontroller business (64.3% of revenues) has helped the company gain momentum. The launch of innovative products and frequent updates in its existing portfolio drive growth.
We believe that recently launched products like the PIC32MZ DA microcontroller (MCU) family and the PIC16F19197 family (low power MCUs) will increase customer base. The newly added Wi-Fi Software Development Kit (SDK) with Apple HomeKit support further expands its product portfolio. All these provide a competitive edge to the company.
Microchip Technology Incorporated Revenue (TTM)
Microchip Technology Incorporated Revenue (TTM) | Microchip Technology Incorporated Quote
Positive Estimate Revisions
The Zacks Consensus Estimate for fiscal 2018 has increased 8.4% to $4.6 over the last 30 days. The estimate for fiscal 2019 increased 10.5% to $4.93 over the same period of time.
Other Stocks to Consider
A few notable stocks in the broader technology space are Applied Materials, Inc. AMAT, Applied Optoelectronics, Inc. AAOI and AppFolio, Inc. APPF. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Long-term earnings growth rates for Applied Materials, Applied Optoelectronics and AppFolio are currently projected to be 16.58%, 20% and 30%, respectively.
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