MCHP - Microchip Technology Shifting Toward A Lucrative Sustainable Model But Sentiment Is A Real Concern

• Microchip's target of 2x industry growth rate may be ambitious, but 6% to 8% long-term revenue growth with very attractive margins looks doable.
• Microchip has a great portfolio across MCU, analog, memory, and FPGA products, but I do see less leverage to more attractive growth opportunities like discrete power, routing/switching, sensing, et al.
• I believe management's shift toward a "total solutions" offering can maximize the value of its broad portfolio, increase customer share-of-wallet, and drive better margins.
• Higher capex will consume some cash, but management is no longer looking for large-scale M&A and should return more cash to shareholders.
• Valuation is getting interesting, but sentiment remains a risk as semiconductor companies are likely facing declining order momentum and more margin pressures in CY'23.

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