In This Article:
What Happened?
Shares of analog chipmaker Microchip Technology (NASDAQ:MCHP) fell 5.9% in the afternoon session after 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.
The shares closed the day at $56.38, down 5.4% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Microchip Technology? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Microchip Technology’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about 2 months ago when the stock dropped 10.3% on the news that the company provided updated guidance for the December 2024 quarter, with expectations for revenue to be close to the low end of its previous forecast of $1.025 to $1.095 billion. Also, the company is closing its Tempe wafer fabrication facility due to elevated inventory levels and ample capacity.
Microchip Technology is down 0.9% since the beginning of the year, and at $56.39 per share, it is trading 43.3% 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 $1,052.
When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.