NASDAQ: MCHP
COMPANY DESCRIPTION
Founded in – 1989 | Current Market Cap
– 18.71 Billion USD
Microchip
Technology Inc. develops and manufactures semiconductor products for various
embedded control applications worldwide. Its portfolio comprises 8- and 16-bit
pic microcontrollers and 16-bit dspic digital signal controllers, which feature
onboard flash (reprogrammable) memory technology; and linear, mixed-signal,
power management, thermal management, battery management, and interface
devices. Development tools enable system designers to program a pic
microcontroller and dspic digital signal controllers for specific applications.
Application-specific standard products include patented keeloq security
devices; memory products include serial electrically erasable programmable
read-only memory. Microchip Technology sells to the automotive, communications,
computing, consumer, medical electronics, and industrial control markets. The
company is based in Chandler, Arizona.
RECOMMENDATION
We rate Microchip Technology Inc. a BUY at USD 78 for a target of
USD 90.
Below are the basic reasons to
recommend this stock as a BUY.
·
Microchip is one of the fastest-growing
providers of 16-bit and 32-bit microcontrollers in the world. The
microcontroller business of the company continued to outperform the industry
and enabled it to gain significant market share. Microchip expects to continue
this momentum and strengthen its position as the best-performing
microcontroller franchise in the industry.
·
The company is increasingly expanding its touch
business beyond handsets and tablets in areas, such as automotive industrial
applications. The Analog business has also become one of the largest analog
franchises in the market. To further capitalize on this burgeoning business
potential, Microchip is developing and introducing a wide range of innovative
and proprietary new products. All these initiatives augur well for the
long-term growth prospects of the company.
·
The Semiconductor Industry serves as a driver,
enabler and indicator of technological progress. The Internet of Things (IoT)
is creating newer avenues and is largely believed to be the next semiconductor
growth opportunity with the potential for billions of connected devices. The
company continues to develop and introduce a wide range of innovative and
proprietary new linear, mixed signal, power, interface, and timing products to
fuel the future growth of the analog business. These enable the company to
maintain sustainable revenue growth and expand margins.
·
High quality standards, solid performance,
reliability features, ease of use, pricing and diversity of products make
Microchip one of the better-positioned companies in the semiconductor universe.
With a diligent focus on right-sizing the various components of inventory holding,
Microchip’s investment strategy takes a holistic view of the rapidly evolving
market and deploys a dynamic capital allocation approach.
·
Over the years, Microchip has consistently
returned significant cash to its shareholders through dividends and share
repurchases. All these offer a lucrative investment proposition for investors
seeking to own blue-chip stocks that promise a healthy return on investments.
·
Microchip’s growth is expected to ride on strong
demand for microcontroller and analog products, robust product pipeline and
excellent semiconductor industry prospects.
·
The EPS of Microchip is strolling at 3.271,
measuring its EPS growth this year at 13.38%. As a result, the company has an
EPS growth of 38% for the approaching year. The dividend per share is currently
1.46, which is a dividend yield of 1.76%. Also, the payout ratio is 30.85%,
therefore the dividend is safe according to our calculations.
LAST EARNINGS
Microchip Technology Inc. reported
first-quarter fiscal 2019 non-GAAP earnings of $1.61 per share, surpassing the
Consensus Estimate of $1.49 per share. The figure also improved 22.9% year over
year.
The year-over-year upside was
driven by higher net sales, which increased 24.7% from the year-ago quarter to
$1.213 billion on a GAAP basis. On a non-GAAP basis revenues came in at $1.216
billion. The Consensus Estimate for revenues is pegged at $1.208 billion.
In terms of product line,
microcontroller business (60% of net sales) increased 10.8% sequentially to
$728.6 million. Analog net sales came in at $328.5 million (accounted for 27%
of the total revenues) and increased 35% sequentially. Memory, FPGA, Licensing
and MMO contributed 4%, 3%, 2% and 4% of total revenues, respectively. Geographically,
revenues from Americas, Europe and Asia contributed 22%, 23% and 55% of total
revenues, respectively.
BALANCE SHEET
The company exited the reported
quarter with $649.7 million of cash and short-term investments as compared to
$2.2 billion reported in the previous quarter. Total debt (long plus current
portion) amounted to $10 billion.
During the quarter, Microchip
generated $302.4 million of operating cash flow. The company announced a
quarterly cash dividend of 0.364 cents per share, payable on Sep 4, 2018.
Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.
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