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Needham Boosts PT on Microchip (MCHP) Following Q3 Results; Executing on All Levels

February 8, 2013 9:19 AM EST Send to a Friend
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Price: $45.90 -2.73%

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    8 Buy, 7 Hold, 0 Sell

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    Up: 17 | Down: 38 | New: 6
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Needham & Company is boosting its price target on Microchip Technology (Nasdaq: MCHP) from $37 up to $40 Friday morning, following strong third-quarter 2013 results issued last night. The firm maintains a Buy rating on the stock.

Topline sequential growth for Microchip was 8.5 percent to $416 million, with EPS coming in at 41 cents. Needham was looking for revs of $411.0 million and EPS of 39 cents. Record revs were seen in MCU and Analog segments, noted the firm. MCU market share grew from 9.37 percent in FY11 to 8.25 percent in FY12.

Non-GAAP gross margin of 56 percent also outpaced Needham's expectations.

Needham said it was confident with Microchip's ability to execute amid in uncertain macro environment. The firm like how Microchip management took a voluntary 5 percent pay cut to help control operating expenses (OpEx).

Notably, in the back half of the year, Microchip began to see a "significant" uptick in demand, with bookings coming in exceptionally strong.

On the SMSC acquisition, Needham noted that the move is tracking well, with EPS accretion ahead of both management and the firm's expectations. In the December quarter, Microchip EPS benefited about 7 cents per share from the deal. For FY14, Microchip sees about 38 cents to 42 cents of Accretion, which is roughly 4 cents above Needham's estimate.

For FY13, Needham is modeling EPS of $1.84 (up from $1.76) and for FY14, EPS should be $2.10 (from $1.90).

Microchip shares are up in early trading. For more on the results, click here.

For an analyst ratings summary and ratings history on Microchip Technology click here. For more ratings news on Microchip Technology click here.

Shares of Microchip Technology closed at $33.94 yesterday.




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