Microchip Technology MCHP shares have lost 36.1% in the trailing 12 months, lagging the broader Zacks Computer & Technology sector’s appreciation of 27.7% and the Zacks Semiconductor - Analog and Mixed industry’s decline of 3.5%.

MCHP has also underperformed its industry peers, including Semtech SMTC, MACOM Technology Solutions MTSI and Analog Devices ADI.
 
Over the same time frame, shares of Semtech, MACOM Technology Solutions and Analog Devices have gained 240.3%, 57.1% and 11.1%, respectively.

Microchip Technology's share price decrease is primarily attributed to inconsistent top-line growth, which is being heavily impacted by significant challenges in Europe and Asia.

The company has been facing a downturn in demand across several key sectors, including automotive, industrial, IoT and communications, which has contributed to the decrease in its share price.

Rising Inventory & Macroeconomic Uncertainties Impact MCHP

Microchip Technology is facing heightened inventory challenges, with levels rising to 247 days at the end of the second quarter of fiscal 2025, an increase of 10 days from the previous quarter, indicating overstocking concerns. Microchip has suspended most factory expansion projects and reduced capital investment planned for fiscal 2025, negatively impacting its prospects.

MCHP derives a substantial share of its revenues from international markets, exposing it to global economic and currency fluctuations. Asia accounts for 50% of total revenues, while Europe contributes 18%. As a result, unfavorable currency exchange rate movements can significantly impact the company’s top-line growth.

The company highlighted a challenging business environment, marked by limited visibility and persistent macroeconomic weaknesses, especially within the industrial sector.

Microchip Technology’s Earnings & Sales Estimates Trend Down

The Zacks Consensus Estimate for MCHP’s fourth-quarter fiscal 2025 earnings is pegged at 32 cents per share, unchanged over the past 30 days. The figure indicates a 43.86% year-over-year decline.

The Consensus Estimate for fourth-quarter fiscal 2025 sales is pegged at $1.09 billion, suggesting an 18.05% year-over-year decline.

However, MCHP has a long history of reporting strong quarterly performance, with earnings surpassing the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 2.70%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion

Microchip Technology is facing considerable pressure on its growth and profitability, with rising inventory levels, weakening demand across major markets and ongoing currency headwinds. These factors, combined with macroeconomic uncertainties, suggest a cautious approach. Investors may consider staying away from the stock for the time being.

Microchip currently has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Analog Devices, Inc. (ADI) : Free Stock Analysis Report

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