Microchip Technology shares slide 7% as weak guidance overshadows earnings beat

CHANDLER, Ariz. – Microchip Technology Incorporated (NASDAQ:) reported first-quarter earnings that slightly beat analyst expectations, but shares tumbled 7% in premarket trading Friday due to disappointing guidance for the current quarter.

The semiconductor company posted adjusted earnings per share of $0.53, edging past the analyst consensus of $0.52. Revenue came in at $1.24 billion, in line with estimates but down 45.8% YoY.

However, Microchip’s outlook for the second quarter fell short of Wall Street projections. The company expects revenue between $1.12 billion and $1.18 billion, below the $1.311 billion consensus. Adjusted EPS guidance of $0.40 to $0.46 also missed analysts’ $0.59 estimate.

CEO Ganesh Moorthy cited ongoing challenges in the macro environment, particularly weakness in industrial and automotive markets in Europe and the Americas. He noted that while “green shoots” observed last quarter have continued, they “have not developed as robustly as anticipated.”

“We delivered June 2024 quarterly results in line with our guidance as we continued to navigate a challenging macro environment in combination with our customers focusing on reducing their inventory positions based on short lead times for our products,” Moorthy stated.

Following the report, BofA Securities analysts downgraded Microchip stock from Buy to Neutral and slashed their price target to $90.00 from $110.00.

“We downgrade Microchip (MCHP) to Neutral from Buy as cyclical challenges could persist for a few more quarters, while strength of CY25 rebound could be more muted than consensus expects on persistently high inventory.”

The company declared a quarterly dividend of 45.4 cents per share, up 10.7% from the year-ago quarter. Microchip also repurchased $72.7 million worth of shares during the quarter.

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