What Happened?
Shares of analog chipmaker Microchip Technology (NASDAQ:MCHP) fell 7% in the morning session after the company reported disappointing fourth-quarter results, with revenue declining 41.9% compared to the previous year, missing Wall Street expectations. Likewise, its revenue guidance for the next quarter fell short of Wall Street's estimates. Management attributed the decline to ongoing inventory destocking at customers and channel partners, stating, 'We believe the correction cycle is still not complete.' Overall, this was a weaker quarter, given the weak guidance.
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What The Market Is Telling Us
Microchip Technology’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock dropped 5.9% on the news that Texas Instruments, a peer in the semiconductor industry, reported disappointing fourth-quarter results, highlighting rising inventory levels and softening demand in critical end markets. Texas Instruments' earnings guidance for the next quarter fell short of Wall Street's expectations.
Adding to the negative was the fact that inventory levels increased, contributing to weaknesses in Japan and Europe, especially in the auto, and industrial markets. These weaknesses were partly offset by continued strength in China's auto and smartphone markets. These pockets of strength helped drive revenue and EPS past Wall Street's estimates during the quarter. Regardless, it was a challenging quarter, amplifying fears of weakening demand.
Microchip Technology is down 9.3% since the beginning of the year, and at $51.62 per share, it is trading 48.1% below its 52-week high of $99.49 from May 2024. Investors who bought $1,000 worth of Microchip Technology’s shares 5 years ago would now be looking at an investment worth $971.99.
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