Why Microchip Technology (MCHP) Shares Are Plunging Today
Max Juang /
August 4, 2023
What Happened:
Shares of analog chipmaker Microchip Technology (NASDAQ:MCHP) fell 5.01% in the morning session after the company reported underwhelming first quarter results that came in roughly in line with analysts' revenue and earnings per share estimates. In addition, revenue guidance for the next quarter was below Consensus.
Management cited some of the reasons for the weakness including: 1) China demand has weakened and has not recovered; 2) seeing initial signs of a slowdown across auto and industrial segments; and 3) Europe is slowing, as exports to China are weakening. On the other hand, gross margin improved. The company also generated strong free cash flow. Overall, it was a weaker quarter for the company.
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What is the market telling us:
Microchip Technology's shares are quite volatile and over the last year have had 9 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move was three months ago, when the stock dropped 7.29% on the news that the company reported fourth quarter results that narrowly beat analysts' revenue estimates. EPS also beat and revenue guidance for the next quarter came in above Consensus. However, free cash flow fell short, and inventory levels rose. Management also provided mixed macro commentary, adding to the uncertainty around the near-term outlook.
Microchip Technology is up 20.6% since the beginning of the year, but at $83.44 per share it is still trading 11.2% below its 52-week high of $93.94 from July 2023. Investors who bought $1,000 worth of Microchip Technology's shares 5 years ago would now be looking at an investment worth $1,740.
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