Microchip With Near-Term Risk
By Abdul Saleh on August 21, 2008 | More Posts By Abdul Saleh | Author's Website
Microchip Technology, Incorporated (MCHP) reported record revenues of $268.2 million in Q1:FY09, but was lower than our estimate of $271 million. Adjusted EPS (excluding one-time items) came in at $0.44, in line with our estimate. Business was strong across all segments.
Microcontroller sales were up 3% quarter over quarter [q/q] and up 2% year over year [y/y]. Flashbased controllers were up 3.5% q/q and 11.5% y/y. Non-GAAP gross margin came in at 61.6% from 61.5% in the prior quarter and 60.6% in the year-ago quarter. Microchip also announced a quarterly cash dividend of $0.338 on its common stock, a sequential dividend rate increase of 2.4% and up 14.6% y/y/. MCHP dividend rate is roughly 4%, one of the highest distributed in the semiconductor sector.
We maintain our Hold rating on the shares. We believe that MCHP’s consumer exposure remains a risk till Q3:FY09 as early OEM [original equipment manufacturer] factory shut-downs could possibly result in canceled orders if consumer demand fails to materialize. Also, component and commodity costs are strong headwinds for incremental gross margin improvement as some effort over several quarters is required to reach the target model of 62%.
We now expect the company to earn $1.81 per share (pro-forma, excluding stock compensation) for FY 2009. GAAP EPS (E), including stock-based compensation stands at $1.67. Our target price remains at $34, which has been derived by applying a P/E multiple of 18.8x to our fiscal 2009 EPS estimate.
One Reason Why The US Dollar Might Rise
Ron Paul Thinks That Fed “Oversight Is Laughable”
S&P 500 Index Is Still Overvalued
This Small Oil Exploration Company Is Ripe For A Takeover… Here’s How To Profit
Obama Commits To Free Trade Agreement With South Korea, But Auto Trade Remains An Obstacle
Bay Street Stocks Slip Slightly Again - Canadian Commentary - 1 day ago
Stocks Close Mostly Lower Amid Disappointing Quarterly Results - U.S. Commentary - 1 day ago
Bay Street Stocks Linger Slightly Below Unchanged Level - Canadian Commentary - 1 day ago
Stocks Remain Stuck In The Red In Mid-Afternoon Trading - U.S Commentary - 1 day ago
European Markets Fall, Led By Banks, Oils - European Commentary - 1 day ago


