On Tuesday, KeyBanc Capital Markets adjusted its outlook on Microchip Technology (NASDAQ:MCHP), reducing its price target to $90 from $95, while maintaining an Overweight rating on the stock.
According to InvestingPro data, the company, currently valued at $37.76 billion, has seen 18 analysts revise their earnings expectations downward for the upcoming period, reflecting growing market concerns.
The adjustment came after Microchip Technology announced that its third-quarter revenue is projected to hit the lower end of its previously issued guidance, anticipating $1.02 billion, which marks a 12% quarter-over-quarter decrease. This figure is a downturn from the earlier forecast of $1.06 billion, representing a 9% sequential drop.
The company's weaker-than-expected turns orders, which are orders expected to be filled quickly, influenced the revision. Microchip Technology's CEO, Steve Sanghi, also announced his decision to continue leading the company indefinitely, removing the interim tag from his title. The leadership stability comes at a crucial time, as InvestingPro analysis indicates the stock has experienced significant volatility, with a -25.55% return over the past six months.
In addition to the revenue update and leadership announcement, Microchip Technology disclosed its plan to shut down Fab 2, its fabrication facility in Phoenix. This closure is expected to yield annual cost savings of approximately $90 million. The anticipated cost savings are a significant factor in KeyBanc's reassessment of the company's financial outlook.
KeyBanc has revised its estimates for Microchip Technology to align with the latest developments, which include the anticipated lower revenue and the cost savings from the planned facility closure. The firm's maintained Overweight rating suggests that KeyBanc continues to see the stock as a favorable investment despite the recent challenges and adjustments in financial projections.
With analyst targets ranging from $70 to $98, investors seeking deeper insights can access comprehensive valuation metrics and 14 additional ProTips through InvestingPro's detailed research reports.
In other recent news, Microchip Technology has revised its revenue guidance for the December quarter to approximately $1.025 billion, based on slower-than-expected turn orders. The company also announced plans to close its Tempe wafer fabrication facility, a move expected to result in annual cash savings of around $90 million by mid-2026. This decision aligns with the company's strategy to manage resources effectively amidst challenging market conditions.
Piper Sandler and Citi have maintained their positive ratings on Microchip Technology. Piper Sandler confirmed its Overweight rating with a price target of $85.00, while Citi reiterated its Buy rating with a price target of $82.00. These ratings reflect analysts' confidence in the company's strategic direction and resilience.
CEO Ganesh Moorthy's retirement has led to Steve Sanghi, the company's Chair of the Board, stepping in as interim CEO. Sanghi's extensive experience and previous tenure as CEO are seen as favorable for the company's stability and continuity in leadership.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.