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Here's Why Microchip (MCHP) Stock Is a Strong Buy Right Now

Zacks Equity Research
Updated

On Jun 9, 2018, Microchip Technology MCHP was upgraded to a Zacks Rank #1 (Strong Buy). The upgrade reflects positive earnings estimate revisions as well as the completion of the Microsemi acquisition, following which the company raised guidance.

Notably, the Zacks Consensus Estimate for fiscal 2019 earnings increased 11.6% to $6.54 per share over the last 60 days. For fiscal 2020, the consensus estimate increased 21.6% to $7.60 per share over the same time frame.

Moreover, Microchip Technology beat the Zacks Consensus Estimate for earnings and revenues in each of the trailing four quarters.

Microsemi Acquisition: Key Catalyst

We believe the Microsemi acquisition significantly expands Microchip’s product portfolio, particularly in Communications and Aerospace & Defense verticals.

Following the acquisition, Microchip revised its non-GAAP net sales and earnings guidance for first-quarter fiscal 2019.

Non-GAAP net sales are now expected to be in the range of $1.172-$1.242 billion compared with the earlier guided range of $1.012-$1.062 billion. Earnings are expected to be in the range of $1.41- $1.55 per share compared with the earlier guided range of $1.39-$1.49 per share.

Microchip is benefiting from robust demand for 8-bit, 16-bit and 32-bit microcontrollers. We believe that the company's expanding product portfolio driven by new launches as well as acquisitions will continue to boost its customer base.

Additionally, the company expanded collaboration with Amazon Web Services (AWS) to support AWS offerings as well as develop secure cloud system.

Microchip Technology Incorporated Price and Consensus

Microchip Technology Incorporated Price and Consensus | Microchip Technology Incorporated Quote

 

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Other Stocks to Consider

Investors can also consider Baidu BIDU, Advanced Energy Industries AEIS and The Trade Desk TTD from the broader Computer & Technology sector. All the stocks carry a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Baidu, Match and The Trade Desk is currently pegged at 21.7%, 9% and 22.5%, respectively.

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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

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Zacks Investment Research