bearish

2025 High Conviction Short: Microchip Technology Inc. (MCHP)

William has highlighted this Insight as a Top Pick
1.3k Views25 Nov 2024 11:49
Boomeranged on Tue, 3 Dec 2024 06:11
December 2, 2024, following US Market Close: Steve Sanghi, MCHP Chairman and interim CEO, said Monday that it would close a plant in Tempe, Arizona. Orders have been slower than anticipated and it was revising the December quarter’s outlook to near the low end of its original forecast of about $1.03 billion. Sales continue to slump, with revenue projected to plunge 40% this year.
SUMMARY
  • Initiate a short position in MCHP Target Price Range: $45-50 Time Horizon: 6-12 months
  • Declining fundamentals: Q2 FY2025 revenue declined 48% YoY, with adjusted EPS falling 72% YoY. Valuation concerns: P/E of 36.8x vs. sector median of 22x, unsupported by current performance.
  • Geo-Political risk: 50% of sales from Asia, exposed to potential trade tensions. Operational challenges: Customer destocking and sluggish demand. ETF-Driven price support: Potential for sharp correction if sector rotation occurs.
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