Microchip Technology trending higher, but fundamentals are mixed
The semiconductor industry has been at the center of the trade discussions between China and the U.S. Intellectual property rights are a major sticking point between the two countries. On November 25, China hinted at stricter rules to protect intellectual property rights and chip companies jumped as a result.
One particular chip company I am watching is Microchip Technology (Nasdaq: MCHP). The stock has been trending higher, but there are some concerns when it comes to the company's fundamentals. Looking at the chart first, we see on the daily chart how the stock has moved significantly higher since late May. The stock did pull back in the first part of November, but it looks like it has reversed course at this point.
We see how the daily stochastic readings dropped in to oversold territory in the last few weeks, but the indicators have turned higher and made a bullish crossover on November 22. The indicators were in oversold territory and made bullish crossovers in May, early August, and late August, and each time the stock rallied. This particular setup looks more like the round pattern from May than the V-shaped patterns in August.
While the char looks good, there are some concerns regarding the fundamental performance of the company. Microchip has seen its earnings grow by 25% per year over the last three years while sales have grown by 25% as well. One problem comes from the third quarter earnings report which showed that earnings fell by 9% and sales dropped 7%. Analysts expect earnings to fall by 15% on the year with sales being down an estimated 4.9% for the year.
The company's management efficiency ratings are really strong with the return on equity at 36.8% and the profit margin is at 30.4%.
Looking at the Fundamental Analysis Overview from Tickeron, Microchip only has one area where it is ever so slightly above average. The Profit vs. Risk Rating is at 41 which indicates well-balanced risk and returns. The average Profit vs. Risk Rating for the industry is 67, placing this stock slightly better than average.
The Tickeron Price Growth Rating for Microchip is 50, and that is the midpoint for the ratings. A rating of 1 indicates the highest price growth while a rating of 100 indicates the lowest price growth. The rating measures how the stock price has grown over the past year compared to S&P 500 components.
The SMR rating from Tickeron is 56, indicating strong sales and a profitable business model, but it is slightly below average. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.
The Tickeron Valuation Rating of 74 indicates that the company is slightly overvalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization.
The PE Growth Rating for Microchip is 100, pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents. A rating of 1 indicates highest PE growth while a rating of 100 indicates lowest PE growth.
The sentiment indicators for Microchip are mixed with extreme bullish sentiment from analysts and extreme bearish sentiment from short sellers. There are 22 analysts covering the stock with 18 "buy" ratings and four "hold" ratings. This puts the buy percentage at 81.8% and that is well above average.
The short interest ratio is a whopping 14.0 and that is one of the biggest short interest ratios I have seen lately. The average short interest ratio is around 3.0. If the stock rallies, this high short interest could add fuel to the fire as the short sellers can add buying pressure as they scramble to cover their positions.
MCHP saw its Stochastic Oscillator leaves the overbought zone
The Stochastic Oscillator for MCHP moved out of overbought territory on July 14, 2025. This could be a bearish sign for the stock and investors may want to consider selling or taking a defensive position. A.I.dvisor looked at 59 similar instances where the indicator exited the overbought zone. In of the 59 cases the stock moved lower. This puts the odds of a downward move at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for MCHP moved out of overbought territory on July 11, 2025. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 26 similar instances where the indicator moved out of overbought territory. In of the 26 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where MCHP declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
Bullish Trend Analysis
The 50-day moving average for MCHP moved above the 200-day moving average on July 07, 2025. This could be a long-term bullish signal for the stock as the stock shifts to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where MCHP advanced for three days, in of 302 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 221 cases where MCHP Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. MCHP’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (5.666) is normal, around the industry mean (9.549). P/E Ratio (86.211) is within average values for comparable stocks, (64.217). MCHP's Projected Growth (PEG Ratio) (8.670) is very high in comparison to the industry average of (2.348). Dividend Yield (0.024) settles around the average of (0.020) among similar stocks. P/S Ratio (9.066) is also within normal values, averaging (36.365).
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 76, placing this stock slightly better than average.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
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General Information
a manufacturer of microcontrollers for high volume embedded control applications
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