10. Microchip Technology Incorporated (NASDAQ:MCHP)
Average Analyst Share Price Target Upside: 29%
Average Analyst Share Price Target: $95.52
Number of Hedge Fund Investors in Q1 2024: 35
Microchip Technology Incorporated (NASDAQ:MCHP) sells microcontrollers, signal processors, and other associated products that are used in computing systems such as data centers. It is one of the more unique chip companies since its Total System Solution offers a one stop shop for customers to design and build their embedded systems. These systems are a part of broader data centers, as they allow users to customize their chips for specific use cases. However, even though its product roadmap offers customers a unique edge, Microchip Technology Incorporated (NASDAQ:MCHP) still suffers from the broader cyclical nature of the chip industry. While GPU firms like NVIDIA and AMD have reported robust revenues because of high AI demand, other firms are still struggling with undigested channel inventory, including Microchip Technology Incorporated (NASDAQ:MCHP). This also makes it unsurprising that the firm’s shares are down 11% year to date, despite its exposure to the AI industry.
Aristotle Atlantic Partners mentioned Microchip Technology Incorporated (NASDAQ:MCHP) in its Q2 2024 investor letter. Here is what the firm said:
“Microchip develops, manufactures and sells smart, connected and secure embedded control solutions used by its customers for a wide variety of applications. With over 30 years of technology leadership, Microchip’s broad product portfolio is a Total System Solution for its customers that can provide a large portion of the silicon requirements in their applications. Total System Solution is a combination of hardware, software and services that helps customers increase their revenue, reduce their costs and manage their risks compared to other solutions. Microchip’s synergistic product portfolio empowers disruptive growth trends, including 5G, data centers, sustainability, Internet of Things and edge computing, advanced driver assist systems and autonomous driving, and electric vehicles in key end markets such as automotive, aerospace and defense, communications, consumer appliances, data centers and computing, and industrial.
We believe Microchip’s Total System Solution will continue to support industry share gains and margin expansion as end- market demand for industrial and Internet of Things compute needs begins to recover off current lows. Management has accelerated the drawdown of high customer inventory levels by shutting down manufacturing facilities, and current industry data as well as commentary from peers indicates that overall end demand is seeing early signs of improvement. The company has a demonstrated track record of margin expansion, and we expect to see gross margins trough at the current level and, through internal efficiencies and pricing initiatives for its Total System Solution, expand and drive increasing operating margins and higher levels of free cash flow.”
