Market forces dashed Microchip Technology Inc. (NASDAQ:MCHP) shareholder hopes today after analysts cut their earnings estimates for the year. Both revenue and earnings per share (EPS) estimates were revised down, with analysts seeing dark clouds gathering on the horizon.
Following the latest downgrade, the 23 analysts covering Microchip Technology now have a consensus forecast of revenues of US$4.9b in 2025, reflecting a worrying 26% drop in sales over the past 12 months. Statutory earnings per share are expected to plummet 71% to US$0.74 over the same period. Analysts had previously forecast revenues of US$5.5b and earnings per share (EPS) of US$1.30 in 2025. Indeed, we can see that analysts have become much more pessimistic about Microchip Technology's prospects, cutting their revenue forecasts by a large margin and also their EPS forecasts by a large margin.
Read our latest analysis for Microchip Technology
NasdaqGS:MCHP Earnings and Revenue Growth August 8, 2024
The consensus price target fell 6.4% to $95.10, with the weak earnings outlook clearly pushing the stock above analysts' valuation expectations.
Looking at the bigger picture, one way to understand these forecasts is to see how they compare to both past performance and industry growth projections. These projections show that sales are expected to slow, with annual revenues expected to decline 33% by the end of 2025. This represents a significant decrease from the 11% annual growth rate over the past five years. Comparing this to our data, other companies in the same industry are expected to see revenue growth of 18% per year overall. So, while revenues are predicted to decline, there is no silver lining to this cloud. Microchip Technology is expected to lag behind the industry as a whole.
Conclusion
Most importantly, analysts lowered their earnings per share forecasts, anticipating a clear deterioration in the business environment. Unfortunately, analysts also lowered their revenue forecasts, and industry data indicates that Microchip Technology's revenue is expected to grow more slowly than the overall market. Given the scope of the cuts, it's no surprise that the market is becoming more cautious towards the company.
High debt levels combined with this many downgrades always raises some concerns, especially when these projections are only the first signs of business slowdown. You can learn more about our debt analysis free of charge on our platform here.
Another thing to consider is whether management and/or directors have bought or sold shares recently. Our platform provides an overview of all public market share transactions over the past 12 months here.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
