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Microchip Technology (MCHP) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
·3 min read

Microchip Technology (MCHP) closed at $107.95 in the latest trading session, marking a -1.62% move from the prior day. This move lagged the S&P 500's daily loss of 0.3%. At the same time, the Dow lost 0.8%, and the tech-heavy Nasdaq gained 0.64%.

Heading into today, shares of the chipmaker had gained 6.46% over the past month, outpacing the Computer and Technology sector's gain of 4.11% and the S&P 500's gain of 3.25% in that time.

Wall Street will be looking for positivity from MCHP as it approaches its next earnings report date. This is expected to be November 5, 2020. On that day, MCHP is projected to report earnings of $1.42 per share, which would represent a year-over-year decline of 0.7%. Our most recent consensus estimate is calling for quarterly revenue of $1.26 billion, down 5.93% from the year-ago period.

MCHP's full-year Zacks Consensus Estimates are calling for earnings of $5.93 per share and revenue of $5.18 billion. These results would represent year-over-year changes of +5.52% and -1.73%, respectively.

Any recent changes to analyst estimates for MCHP should also be noted by investors. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. MCHP is holding a Zacks Rank of #3 (Hold) right now.

Investors should also note MCHP's current valuation metrics, including its Forward P/E ratio of 18.5. For comparison, its industry has an average Forward P/E of 34.33, which means MCHP is trading at a discount to the group.

We can also see that MCHP currently has a PEG ratio of 1.71. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MCHP's industry had an average PEG ratio of 2.49 as of yesterday's close.

The Semiconductor - Analog and Mixed industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 92, which puts it in the top 37% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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