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BRAZIL – March 24, 2020: The Microchip Technology Incorporated logo is shown… [+] on a smartphone in this photo illustration. (Image courtesy of Rafael Henrique/SOPA Images/LightRocket/Getty Images)
Getty Images/SOPA Images/LightRocket
Despite a 2.5x increase from its March 2020 bottom, we believe Microchip Technology stock (NASDAQ: MCHP) has significant upside potential at its current price of $145 per share. Microchip stock has risen from $58 in March 2020 to $145 today, while the S&P 500 has risen by over 90% from its lows. Furthermore, the supply has increased by more than 30% since the beginning of the pandemic. Expectations of stable, continued demand growth and good full-year 2021 results, however, lead us to anticipate that Microchip stock might advance about 15% to reclaim its April 2021 high of $166. What Factors Caused A 103 Percent Change In Microchip Technology Stock Between 2018 And Now, According To Our Dashboard? contains the numbers that support our assumptions.
Price of a Stock
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Microchip Technology is a microcontroller, mixed-signal, analog, and Flash-IP integrated circuits maker. Microchip’s stock price has risen by 2% year over year, from $5.35 billion in FY 2019 to $5.44 billion in FY 2021 (Microchip’s fiscal year ends in March). Over this time, net margins fell from 6.7 percent to 6.4 percent, and EPS fell 11 percent from $1.51 in 2019 to $1.35 in FY 2021, thanks to a 12 percent increase in outstanding shares.
Meanwhile, on the strength of strong semiconductor demand growth, Microchip’s P/E (price-to-earnings) multiple increased from 69x in 2019 to 110x now. Furthermore, we believe that the company’s P/E ratio has the potential to rise even higher in the near term as a result of expectations of further demand growth and a favorable shareholder return policy, resulting in a higher stock price.
What Is The Future Of The Stock?
Manufacturing activities were first hampered by the global spread of coronavirus and the ensuing lockdowns, which hampered semiconductor demand from a variety of industries. With the opening of economies, however, industrial activity has increased, and demand for Microchip’s products has returned to normal. Microchip’s FY 2021 earnings show this, with revenue growing from $5.2 billion in FY 2020 to $5.4 billion in FY 2021. Furthermore, with spending under control, operational income increased by more than 1.5 times during this time, from $647 million to $998 million. In comparison, EPS dropped to $1.35 from $2.39 in FY 2020, owing primarily to a substantial $420 million tax gain.
ADDITIONAL INFORMATION FOR YOU
Furthermore, we expect the firm will continue to enjoy substantial revenue growth in the medium term as the lockdowns are removed and vaccinations are distributed globally, and profitability might improve further in the near to medium term if Microchip Technology continues to successfully limit expenses. This will enhance investor expectations, resulting in a higher P/E multiple for the company. Microchip stock, we feel, may recover about 15% from current levels to reclaim its recent highs of $166.
While Microchip Technology’s stock may rise, it’s important to know how it compares to its peers. Microchip Technology Stock Comparison With Peers shows how the company stacks up against its peers on key parameters. Peer Comparisons has a lot more of these kinds of valuable comparisons.
Here you may find all of Trefis’ Featured Analyses and Trefis Data./nRead More

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