Analyst Vivek Arya of Bank of America Securities maintained a Sell rating on Microchip (MCHP – Research Report), retaining the price target of $53.00.
Vivek Arya has given his Sell rating due to a combination of factors impacting Microchip’s financial outlook. Despite the company’s efforts to restructure and correct its cyclical downturn, Arya remains skeptical about its ability to recover earnings power. He projects that Microchip’s earnings in 2026 could be significantly lower than their peak in 2023, with estimates ranging from $2 to $2.50 per share, which is less than half of the previous peak. This projection suggests that the stock is currently trading at a valuation similar to more profitable peers, which raises concerns about its future performance.
Furthermore, Microchip faces several industry and company-specific challenges that could hinder its recovery. These include uncertain global industrial and automotive demand, high internal and external inventory levels, and pricing pressures due to past supplier programs. Additionally, the company is under competitive pressure from rivals like Texas Instruments, which is expanding its capacity and market share. Arya also notes that while cost reductions are necessary, there is limited flexibility to make significant cuts without affecting growth prospects. These factors contribute to his cautious outlook and the Sell rating on Microchip’s stock.
According to TipRanks, Arya is a 5-star analyst with an average return of 14.2% and a 54.51% success rate. Arya covers the Technology sector, focusing on stocks such as Nvidia, Intel, and Marvell.