Microchip Technology (MCHP, Financial) has introduced its MEC175xB embedded controllers, addressing the growing need for advanced security in the face of quantum computing threats. The initiative follows the National Security Agency's recent rollout of the Commercial National Security Algorithm Suite 2.0. This suite provides quantum-resistant cryptographic standards, with a mandate for data center and computing industries to comply within two years.
To assist in this transition, the MEC175xB series is designed with modularity, enabling developers to integrate post-quantum cryptography without abandoning current functionalities. These controllers are engineered to be energy-efficient and incorporate cryptographic algorithms recognized by the National Institute of Standards and Technology, along with secure boot solutions and an improved Enhanced Serial Peripheral Interface. This innovation by Microchip aims to facilitate a seamless shift towards more secure, future-proofed data protection solutions.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 21 analysts, the average target price for Microchip Technology Inc (MCHP, Financial) is $63.04 with a high estimate of $75.00 and a low estimate of $50.00. The average target implies an upside of 3.95% from the current price of $60.65. More detailed estimate data can be found on the Microchip Technology Inc (MCHP) Forecast page.
Based on the consensus recommendation from 24 brokerage firms, Microchip Technology Inc's (MCHP, Financial) average brokerage recommendation is currently 2.1, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Microchip Technology Inc (MCHP, Financial) in one year is $48.81, suggesting a downside of 19.52% from the current price of $60.65. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Microchip Technology Inc (MCHP) Summary page.
MCHP Key Business Developments
Release Date: May 08, 2025
- Net Sales: $970.5 million in the March quarter, down 5.4% sequentially.
- Non-GAAP Gross Margin: 52% in the March quarter.
- Non-GAAP Operating Expenses: 38% of sales in the March quarter.
- Non-GAAP Net Income: $61.4 million in the March quarter.
- Non-GAAP EPS: $0.11 per diluted share in the March quarter.
- GAAP Gross Margin: 51.6% in the March quarter.
- GAAP Net Loss: $156.8 million or $0.29 per share in the March quarter.
- Fiscal Year 2025 Net Sales: $4.42 billion, down 42.3% from fiscal year 2024.
- Non-GAAP Fiscal Year 2025 Gross Margin: 57%.
- Non-GAAP Fiscal Year 2025 Net Income: $708.8 million.
- Non-GAAP Fiscal Year 2025 EPS: $1.31 per diluted share.
- Cash Flow from Operating Activities: $205.9 million in the March quarter.
- Adjusted Free Cash Flow: $182.6 million in the March quarter.
- Capital Expenditures: $14.2 million in the March quarter.
- Inventory: 251 days at the end of March quarter, down 15 days from prior quarter.
- Debt Reduction: Total debt decreased by $1.125 billion in the March quarter.
- Guidance for June Quarter Net Sales: Expected to be $1.045 billion, plus or minus $25 million.
- Guidance for June Quarter Non-GAAP Gross Margin: Expected between 52.2% and 54.2% of sales.
- Guidance for June Quarter Non-GAAP EPS: Expected between $0.18 and $0.26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Microchip Technology Inc (MCHP, Financial) has successfully implemented a 9-point recovery plan, including resizing its manufacturing footprint and reducing inventory levels.
- The company reported a significant improvement in customer relationships, restoring 78% of previously deteriorated relationships to approved or preferred status.
- Microchip Technology Inc (MCHP) has seen a substantial increase in bookings, with a book-to-bill ratio of 1.07, indicating strong demand recovery.
- The company is focusing on strategic initiatives in next-generation technologies, such as AI and network connectivity, which are expected to drive future growth.
- Microchip Technology Inc (MCHP) is committed to returning 100% of its adjusted free cash flow to investors in the form of dividends, demonstrating strong shareholder commitment.
Negative Points
- Net sales for the March quarter were down 5.4% sequentially and 26.8% year-over-year, reflecting ongoing challenges in the market.
- The company reported a GAAP net loss attributable to common shareholders of $156.8 million in the March quarter.
- Microchip Technology Inc (MCHP) is facing headwinds from underutilization charges and inventory reserve charges, impacting gross margins.
- The company has undergone a global layoff of approximately 10% of its employees to reduce operating expenses.
- There is uncertainty regarding the impact of tariffs and global economic conditions on future demand and revenue growth.
