Microchip Earnings: Company Should Be Able To Navigate the Looming Slowdown

Wide-moat Microchip Technology reported solid fiscal first-quarter results but provided investors with a muted outlook for the September and December quarters. We maintain our $90 fair value estimate and view shares as fairly valued. Microchip was long considered by many as a canary in the coal mine regarding broad-based chip demand. However, as its product mix has shifted, and because of the large backlog and long lead times that persist for its products during the global chip shortage, we surmise that Microchip’s looming slowdown isn’t a new downdraft, but rather some headwinds that are on par with peers after several quarters of relative outperformance.