Performance and guidance surpassed expectations Bank of America upgraded Microchip Technology (MCHP.US) rating to “neutral”

The Zhitong Finance App notes that semiconductor company Microchip Technology (MCHP.US) received an upward rating from Bank of America after announcing better-than-expected quarterly results and performance guidelines. The bank raised the Microchip Technology rating from “outperforming the market” to “neutral,” and raised the target price from $44 to $56.

According to financial reports, Microchip's revenue for the first quarter was US$970.5 million, down 27.0% year on year, exceeding market expectations; adjusted earnings per share were $0.11, higher than the forecast of $0.10.

Analyst Vivek Alia said, “After the return of the highly respected former CEO Steve Sanji, the urgency of the company's restructuring and focus on customers/products has increased significantly. Coupled with the recovery of key industrial (aerospace/defense) markets, these factors have all contributed to the improvement of Microchip Technology. ”

Alia pointed out that even a “moderate” recovery in sales could lead to “more than expected” profit growth. Furthermore, gross margin is likely to rise rapidly from the current 53% to a low 60% range. Alia explained that Microchip's management is “highly focused” on business transformation. It has shut down the Tempe, Arizona fabricator, laid off about 10% of its workforce, and stimulated growth through “realignment” of business divisions and channel strategies.

Alia also pointed out potential risk factors, including tariff issues from China and increased competitive pressure from companies such as Texas Instruments (TXN .US), ST (STM.US), and Infineon.