Microchip Remains Capacity Constrained Like Its Peers, but Foresees Solid Growth; $150 FVE

Wide-moat Microchip reported solid fiscal fourth-quarter results and provided investors with an upbeat outlook for the June quarter as the company is seeing robust demand for chips used in a variety of end markets. We raise our fair value estimate to $150 per share from $140, mostly due to the time value of money as we roll our valuation model. Similar to its peers, Microchip is seeing a semiconductor shortage and chip demand far exceeding supply, but this exemplary management team continues to navigate the supply challenges well, including the firm’s Preferred Supply Program, or PSP, which has improved its customer order visibility. We view shares as fairly valued.