Microchip Technology Incorporated (NASDAQ:MCHP) Just Reported And Analysts Have Been Cutting Their Estimates

The yearly results for Microchip Technology Incorporated (NASDAQ:MCHP) were released last week, making it a good time to revisit its performance. It was a credible result overall, with revenues of US$7.6b and statutory earnings per share of US$3.48 both in line with analyst estimates, showing that Microchip Technology is executing in line with expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Microchip Technology

Taking into account the latest results, the 23 analysts covering Microchip Technology provided consensus estimates of US$5.49b revenue in 2025, which would reflect a concerning 28% decline over the past 12 months. Statutory earnings per share are forecast to plummet 62% to US$1.33 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$5.96b and earnings per share (EPS) of US$1.75 in 2025. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a pretty serious reduction to earnings per share numbers.

Despite the cuts to forecast earnings, there was no real change to the US$97.99 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Microchip Technology analyst has a price target of US$110 per share, while the most pessimistic values it at US$85.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that revenue is expected to reverse, with a forecast 28% annualised decline to the end of 2025. That is a notable change from historical growth of 12% 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 17% annually for the foreseeable future. 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 the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Microchip Technology analysts - going out to 2027, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Microchip Technology that you need to be mindful of.

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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.