Key Takeaways
- Microchip Technology fell 10% today on a December-quarter guide below estimates.
- CEO Steve Sanghi said data center is “in the bubble.”
- Texas Instruments and NXP Semiconductors guided December flat to higher, pointing to Microchip’s own supply squeeze.
- Excluding one-time revenue, the guide beats the usual December dip, and the stock looks cheap.
Microchip Technology (MCHP) guided December-quarter sales 1% lower at the midpoint after Thursday’s close, below the $1.63 billion analysts expected. The stock is down 10% today.
Asked on Thursday’s call whether an AI data-center bubble could hurt Microchip, CEO Steve Sanghi said “data center is in the bubble.” Data center is 16.7% of sales, he said, so Microchip “should outperform” companies that are “kind of all data center.” And Texas Instruments (TXN) and NXP Semiconductors (NXPI), which sell to the same industrial and auto customers, guided December flat to higher.
The guide is better than it looks
September’s $1.622 billion of sales included about $53 million of one-time revenue. Strip it out, and management says December’s guide is 5% to 7% better than its normal seasonal drop.
The rest is supply: “Lead times are lengthening across our supply chain,” Sanghi said. Data-center demand has been taking capacity at the assembly and test houses Microchip uses, he said, and Microchip paused most of its own factory expansion in the downturn.
Texas Instruments, which credits its own 300mm production, guided December sales about flat at $6.05 billion. NXP guided sales up 2%. So the squeeze looks like Microchip’s own.
Astera has more at stake
Microchip’s PCIe Gen6 switch and retimer design wins doubled to 24 last quarter, in sockets Astera Labs (ALAB) counts on. Astera guided December revenue to $730 million to $750 million, from $584.9 million, so its customers aren’t slowing yet. Its February report will show us whether a second supplier dents its 72.4% non-GAAP gross margin.
TIKR tracks 26 analysts on Microchip Technology. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Microchip Technology, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Microchip Technology’s Analyst Ratings
The stock is cheap
Before the report, analysts expected normalized EPS to more than double this fiscal year, to $3.66.
December’s EPS guide is $0.04 short of estimates, a small dent in that year.
Microchip traded at 16x forward earnings at Thursday’s close, against a five-year average of 26x.
At today’s price, it’s about 14x.
The market sold the headline number and skipped the math under it. And a cooler data-center market would free up capacity for Microchip. Of course, if the squeeze drags on, estimates have further to fall. The March-quarter guide, due in early February, will show us.
So what is Microchip stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
