Needham & Company upgraded Microchip Technology (NASDAQ: MCHP) from Hold to Buy with a price target of $60.00 on earnings power.

Analyst Rajvindra Gill commented, "We are upgrading MCHP to a Buy rating with a $60 PT after Dialog announced it will not revise its proposal to acquire ATML. MCHP intends to pay $8.15 per share consisting of $7.00 of cash and a fixed value $1.15 of its stock to acquire ATML or a total consideration of $3.5B. We believe the combination bolsters MCHP’s IoT & MCU portfolios. We calculate $0.60-0.80 of possible earnings accretion. We believe MCHP’s track record of cost-effectively and efficiently integrating companies places it at a unique advantage during a period of rapid consolidation. With the purchase of ATML, MCHP becomes one of the major MCU suppliers with a suite of ARM-based offerings along with an improved connectivity portfolio. Our pro-forma analysis yields $3.60 of earnings power. Our $60 PT is based on a 16.6x P/E multiple on a combined earnings power of $3.60."

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Shares of Microchip Technology closed at $42.04 yesterday.