MCHP · Microchip Technology
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $74.17
Note written ·
Price against the kill line
16.8% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $74.17, on record since 11 November 2026. The shares are down 22.7% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $74.17, which sits above the 50-day average of closes and would show the shares leading the S&P 500. December-quarter net sales above the $1.638 billion top of guidance would also show the shares leading.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 1,622
- Revenue, change on a year (%)
- +42.2
- Gross margin (%)
- 65.9
- Operating margin (%)
- 28.6
- Free cash flow, four quarters ($M)
- 1,455
- Net cash, cash less debt ($M)
- −5,060
- Price to earnings (×)
- 40.1
- Enterprise value to sales (×)
- 6.9
All filed numbers
What Microchip Technology reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 1,622 | +42.2 | 65.9 | 28.6 |
| first filed | 1,485 | +38.0 | 63.2 | 22.7 |
| first filed | 1,311 | +35.1 | 61.0 | 16.6 |
| first filed | 1,186 | +15.6 | 59.6 | 12.8 |
| first filed | 1,140 | −2.0 | 55.9 | 7.8 |
| first filed | 1,076 | −13.4 | 53.6 | 3.0 |
| Pre-tax income ($M) | 418 |
| Net income ($M) four quarters: 838 | 401 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +1.0 |
| Operating cash flow ($M) | 1,529 |
| Capital spending ($M) | 73.7 |
| Free cash flow ($M) | 1,455 |
| Cash and short-term investments ($M) | 457 |
| Debt ($M) long-term debt | 5,517 |
| Net cash, cash less debt ($M) | −5,060 |
| Deferred revenue ($M) +17.1% on a year | 187 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 963 |
| Inventory ($M) | 1,117 |
| Shareholders' equity ($M) | 6,641 |
| Market value ($M) | 33,568 |
| Enterprise value, market value plus net debt ($M) | 38,628 |
| Enterprise value to sales (×) | 6.9 |
| Enterprise value to operating income (×) | 33.0 |
| Price to earnings (×) | 40.1 |
| Price to book value (×) | 5.1 |
| Free-cash-flow yield (%) | 4.3 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 5.7% of shares outstanding sold short, 3.6 days of average trading to cover, −6.2% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $310K |
| 12 monthsfrom | $0 | $71.1M |
The thesis
Microchip Technology is more likely to lag the S&P 500 over the next three months. Its 5 November 2026 outlook guides December-quarter sales to between down 3% and up 1% from the September quarter, with a lower gross margin, and analysts cut price targets afterward. The December-quarter report, expected in early February 2027, settles whether sales growth resumes.
The September-quarter report on 5 November 2026 beat guidance. Net sales were $1.622 billion, up 42.2% from a year earlier and 9.2% from the June quarter. Non-GAAP (adjusted) earnings were $0.97 per diluted share, and non-GAAP gross margin was 66.5% (Form 8-K exhibit 99.1).
The outlook is what the market sold. December-quarter net sales guidance is $1.573–$1.638 billion, non-GAAP gross margin guidance is 64.0–65.0%, and non-GAAP earnings guidance is $0.87–$0.95 per share (Form 8-K exhibit 99.1).
The shares closed at $64.85 on 5 November 2026, fell to $58.35 on 6 November 2026 and closed at $62.08 on 12 November 2026. That is 41.4% below the 52-week intraday high of $105.91 set on 8 May 2026, and the three-month change is −21.1%. The price already reflects a pause in sales growth and a margin step-down, but it still sits below both the 50-day and 200-day averages.
Bullish and bearish views on Microchip Technology Incorporated
The bull case on Microchip Technology Incorporated (MCHP), in brief: the quarter beat the guided range. The bear case: the outlook implies no sequential growth.
Bull case
- The quarter beat the guided range. Net sales of $1.622 billion, up 42.2% from a year earlier, and non-GAAP earnings of $0.97 per share topped the ranges given in August (Form 8-K, 5 November 2026).
- Cash generation is strong. Operating cash flow was $419.2 million in the September quarter and $930.7 million for the six months ended 30 September 2026 (Form 8-K, 5 November 2026).
- Most targets sit well above the price. After the cuts, KeyBanc's target is $120 (Overweight), Rosenblatt's $115 (Buy), Argus's $100 (cut from $130 on 10 November 2026), Jefferies' $85 (Buy, 7 November 2026) and Barclays' $90 (Equal-Weight, 9 November 2026). The close on 12 November 2026 was $62.08.
- Top-of-range guidance leaves room. The December sales range extends to $1.638 billion, up 1% from the September quarter, so a result at the top would show growth continuing (Form 8-K, 5 November 2026).
Bear case
- The outlook implies no sequential growth. December-quarter sales guidance runs from down 3% to up 1%, a midpoint of down 1% (Form 8-K, 5 November 2026).
- Gross margin is guided down. The 64.0–65.0% non-GAAP forecast compares with 66.5% reported for the September quarter.
- Analysts cut targets across the board. Truist cut to $62 (Hold) on 6 November 2026, Wells Fargo to $70 (Equal-Weight) on 6 November 2026 and Morgan Stanley to $72 (Equal-Weight) on 9 November 2026. Argus cut to $100 from $130 on 10 November 2026.
- Debt remains large. Long-term debt was $5,517.2 million against $457.0 million of cash and short-term investments at 30 September 2026 (Form 8-K, 5 November 2026).
- Inventory is rising. Inventory was $1,117.3 million at 30 September 2026, up from $1,035.4 million at 31 March 2026 (quarterly report on Form 10-Q, filed 5 November 2026).
- An executive sold at higher prices. Chief Financial Officer James Bjornholt sold 4,112 shares at $75.32 on 25 August 2026 under a Rule 10b5-1 plan, a pre-arranged selling schedule (SEC Form 4, filed 26 August 2026).
Price setup
The shares closed at $62.08 on 12 November 2026. The five sessions since the 6 November 2026 close of $58.35 have ranged from $60.33 (10 November 2026) to $62.13 (11 November 2026). That is a stabilisation, not yet a recovery.
The 50-day average of closes is $73.96 and the 200-day average is $78.77, both as of 12 November 2026. The shares sit below both. The 52-week closing low is $49.02, set on 20 November 2025.
Truist's $62 target sits at the current close. Targets from Wells Fargo ($70) and Morgan Stanley ($72) are within 16% of it, while KeyBanc and Rosenblatt remain above $100.
Catalysts ahead
- 23 November 2026: Record date for the 45.5-cent quarterly dividend, payable on 8 December 2026. Confirms the dividend declared with the 5 November 2026 results is intact.
- ~5 February 2027 (est.): Report for the December quarter (fiscal third quarter of 2027). Tests the $1.573–$1.638 billion sales and 64.0–65.0% non-GAAP gross margin guidance and shows whether sales growth resumes.
What would change the view
A daily close above $74.17, which sits above the 50-day average of closes and would show the shares leading the S&P 500. December-quarter net sales above the $1.638 billion top of guidance would also show the shares leading.
What it trades with
Microchip trades with the cyclical analog and microcontroller group and with the broader semiconductor market. Market news reported that the Nasdaq 100 had its worst day since 2020 around the 6 November 2026 reaction, so the fall in the shares coincided with a weak market.
The company's fiscal year ends in March, so the fiscal second quarter of 2027 is the quarter ended 30 September 2026 and the December quarter is the fiscal third quarter of 2027.
The evidence, claim by claim (7)
- September-quarter net sales were $1.622 billion, up 42.2% from a year earlier and 9.2% from the previous quarter; non-GAAP gross margin 66.5%; non-GAAP earnings $0.97 per diluted share. Microchip fiscal second quarter 2027 results, Form 8-K exhibit 99.1 · as of
- December-quarter guidance: net sales down 3% to up 1% from the previous quarter ($1.573–$1.638 billion), non-GAAP gross margin 64.0–65.0%, non-GAAP earnings $0.87–$0.95 per share. Microchip fiscal second quarter 2027 results, Form 8-K exhibit 99.1 · as of
- Operating cash flow was $419.2 million in the September quarter and $930.7 million for six months; long-term debt $5,517.2 million; cash and short-term investments $457.0 million. Microchip fiscal second quarter 2027 results, Form 8-K exhibit 99.1 · as of
- Truist lowered its Microchip price target to $62 (Hold) and Wells Fargo to $70 (Equal-Weight). Company news (analyst notes) · as of
- Morgan Stanley lowered its target to $72 (Equal-Weight) and Barclays to $90 (Equal-Weight). Company news (analyst notes) · as of
- Argus Research lowered its Microchip price target to $100 from $130. Company news (analyst notes) · as of
- Chief Financial Officer James Bjornholt sold 4,112 shares at $75.32 under a Rule 10b5-1 plan. SEC Form 4 filed 26 August 2026 · as of
Sources
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