We view wide-moat Microchip Technology (MCHP) as one of the highest-quality semiconductor companies that we cover. Its pending acquisition of Microsemi remains on track, with management expecting the deal to close in June. We believe that this acquisition will be nicely accretive to Microchip and that management might even be conservative about the potential synergies from the deal. In the off chance the Microsemi deal were to unexpectedly fall apart, our $112 fair value estimate would probably revert to around $97, which was our valuation before the merger announcement. Thus, we think Microchip is undervalued even on a stand-alone basis.
Microchip is a leading supplier of microcontrollers, or MCUs, which are semiconductors that act as the brains in a wide variety of common electronic devices, from garage door openers to electric razors and many products in between. We view Microchip as one of the best-run companies in the MCU market and especially like its focus on higher-margin chip opportunities across a wide array of end markets.
Brian Colello, CPA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.