2024-02-06 06:00:51 ET
Summary
- Microchip has a complete portfolio of semiconductors, from the Microcontroller and analog to the FPGA, providing a one-stop-shop solution for its customers.
- After key but expensive acquisitions, the company finally completed its deleveraging process. The balance sheet allows for a solid cash distribution to shareholders.
- End markets are experiencing a cyclical correction. In the recent quarterly result, the management notes that no clear rebound is seen in the short term.
- A DCF valuation indicates the stock is fairly valued, while the stock is close to its all-time highs: there is time to wait for a better entry point. I rate Microchip as a Hold.
My thesis
Microchip (MCHP) owns a solid portfolio combining Microcontrollers, Analogs, programmable processors, and software solutions. This complete offering allows for integrated and tailor-made solutions. While the acquisition of Microsemi in 2018 was necessary, it increased Microchip's leverage position significantly with an ND/EBITDA reaching 5x in 2019. Despite a solid cash-flow generation, it took years to reduce such debt burden....
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For further details see:
Microchip: Still Digesting An Inventory Build Up