Downgrade: Here's How Analysts See Microchip Technology Incorporated (NASDAQ:MCHP) Performing In The Near Term

Market forces rained on the parade of Microchip Technology Incorporated (NASDAQ:MCHP) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the latest downgrade, the 23 analysts covering Microchip Technology provided consensus estimates of US$4.9b revenue in 2025, which would reflect a disturbing 26% decline on its sales over the past 12 months. Statutory earnings per share are supposed to plummet 71% to US$0.74 in the same period. Previously, the analysts had been modelling revenues of US$5.5b and earnings per share (EPS) of US$1.30 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.

Check out our latest analysis for Microchip Technology

The consensus price target fell 6.4% to US$95.10, with the weaker earnings outlook clearly leading analyst valuation estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 33% by the end of 2025. This indicates a significant reduction from annual growth of 11% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 18% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Microchip Technology is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Microchip Technology's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. You can learn more about our debt analysis for free on our platform here.

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.