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published in Blogs
Nov 26, 2019

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.

Related Ticker: MCHP

MCHP sees its Stochastic Oscillator ascending out of oversold territory

On February 20, 2024, the Stochastic Oscillator for MCHP moved out of oversold territory and this could be a bullish sign for the stock. Traders may want to buy the stock or buy call options. Tickeron's A.I.dvisor looked at 49 instances where the indicator left the oversold zone. In of the 49 cases the stock moved higher in the following days. This puts the odds of a move higher at over .

Price Prediction Chart

Technical Analysis (Indicators)

Bullish Trend Analysis

The Moving Average Convergence Divergence (MACD) for MCHP just turned positive on February 22, 2024. Looking at past instances where MCHP's MACD turned positive, the stock continued to rise in of 46 cases over the following month. The odds of a continued upward trend are .

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where MCHP advanced for three days, in of 310 cases, the price rose further within the following month. The odds of a continued upward trend are .

MCHP may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.

Bearish Trend Analysis

The Momentum Indicator moved below the 0 level on February 23, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on MCHP as a result. In of 91 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .

MCHP moved below its 50-day moving average on January 30, 2024 date and that indicates a change from an upward trend to a downward trend.

The 10-day moving average for MCHP crossed bearishly below the 50-day moving average on February 06, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 19 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .

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 .

The Aroon Indicator for MCHP entered a downward trend on February 23, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 59, placing this stock better than average.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly undervalued 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 (6.321) is normal, around the industry mean (8.785). P/E Ratio (19.355) is within average values for comparable stocks, (113.135). MCHP's Projected Growth (PEG Ratio) (8.189) is very high in comparison to the industry average of (2.451). Dividend Yield (0.020) settles around the average of (0.021) among similar stocks. P/S Ratio (5.336) is also within normal values, averaging (11.384).

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable 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.

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. MCHP’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to 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.

Notable companies

The most notable companies in this group are NVIDIA Corp (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), Taiwan Semiconductor Manufacturing Company Ltd (NYSE:TSM), Advanced Micro Devices (NASDAQ:AMD), Intel Corp (NASDAQ:INTC), QUALCOMM (NASDAQ:QCOM), Applied Materials (NASDAQ:AMAT), Texas Instruments (NASDAQ:TXN), Lam Research Corp (NASDAQ:LRCX), Micron Technology (NASDAQ:MU).

Industry description

The semiconductor industry manufacturers all chip-related products, including research and development. These chips are used in innumerable electronic devices, including computers, cell phones, smartphones, and GPSs. Intel Corporation, NVIDIA Corp., and Broadcomm are some of the prominent players in this industry. Semiconductor companies usually tend to do well during periods of healthy economic growth, thereby inducing further research and development in the industry – which in turn augurs well for productivity and growth in the economy. In the near future, demand for semiconductor products (and possibly innovation within the segment) should only expand further, with the proliferation of 5G, autonomous vehicles, IoT, and various AI-driven electronics set to herald a new, advanced chapter in the technology-driven world as we know it. With burgeoning prospects comes great competition. In 2015, SIA estimated that U.S. semiconductor industry ranks as the second most competitive U.S. industry out of 2882 U.S. industries designated manufacturers by the U.S. Census Bureau.

Market Cap

The average market capitalization across the Semiconductors Industry is 40.31B. The market cap for tickers in the group ranges from 13.43K to 1.97T. NVDA holds the highest valuation in this group at 1.97T. The lowest valued company is CYBL at 13.43K.

High and low price notable news

The average weekly price growth across all stocks in the Semiconductors Industry was -1%. For the same Industry, the average monthly price growth was 2%, and the average quarterly price growth was 13%. AXTI experienced the highest price growth at 61%, while SQNS experienced the biggest fall at -69%.

Volume

The average weekly volume growth across all stocks in the Semiconductors Industry was -21%. For the same stocks of the Industry, the average monthly volume growth was -38% and the average quarterly volume growth was -22%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 58
P/E Growth Rating: 48
Price Growth Rating: 50
SMR Rating: 66
Profit Risk Rating: 59
Seasonality Score: -47 (-100 ... +100)
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MCHPDaily Signal changed days agoGain/Loss if shorted
 
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published price charts
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published General Information

General Information

a manufacturer of microcontrollers for high volume embedded control applications

Industry Semiconductors

Profile
Fundamentals
Details
Industry
Semiconductors
Address
2355 West Chandler Boulevard
Phone
+1 480 792-7200
Employees
22600
Web
https://www.microchip.com
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MCHP and

Correlation & Price change

A.I.dvisor indicates that over the last year, MCHP has been closely correlated with ADI. These tickers have moved in lockstep 87% of the time. This A.I.-generated data suggests there is a high statistical probability that if MCHP jumps, then ADI could also see price increases.

1D
1W
1M
1Q
6M
1Y
5Y
Ticker /
NAME
Correlation
To MCHP
1D Price
Change %
MCHP100%
-1.26%
ADI - MCHP
87%
Closely correlated
-0.94%
NXPI - MCHP
85%
Closely correlated
-0.27%
TXN - MCHP
80%
Closely correlated
-1.05%
STM - MCHP
80%
Closely correlated
-1.95%
SWKS - MCHP
76%
Closely correlated
-0.98%
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