Analysts Just Shaved Their Microchip Technology Incorporated (NASDAQ:MCHP) Forecasts Dramatically

Market forces rained on the parade of Microchip Technology Incorporated (NASDAQ:MCHP) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the consensus from Microchip Technology's 24 analysts is for revenues of US$6.2b in 2025, which would reflect a concerning 28% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to tumble 54% to US$2.00 in the same period. Prior to this update, the analysts had been forecasting revenues of US$7.4b and earnings per share (EPS) of US$3.05 in 2025. Indeed, we can see that the analysts are a lot more bearish about Microchip Technology's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Microchip Technology

Analysts made no major changes to their price target of US$92.56, suggesting the downgrades are not expected to have a long-term impact on Microchip Technology's valuation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Microchip Technology's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 23% by the end of 2025. This indicates a significant reduction from annual growth of 13% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 16% annually for the foreseeable future. It's pretty clear that Microchip Technology's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Microchip Technology. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Microchip Technology after the downgrade.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Microchip Technology, including a weak balance sheet. For more information, you can click here to discover this and the 1 other concern we've identified.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.