- Microchip Technology offers a long list of products, solutions, and software for a variety of clients. With its tools, the company is involved in the new 5G revolution.
- Intangibles and goodwill may generate significant sales growth in the coming months. Keep in mind that Microchip acquired these assets because the management expects to make some returns.
- Interestingly, most analysts also expect that the company will pay down its debt from $8.6 billion in 2021 to $4 billion in 2024.
- When the management reports the free cash flow expected for the years 2022-2025, the credit conditions offered to Microchip will be better than now. As a result, I would be expecting a decline in the cost of debt and the WACC.
- I designed another case scenario with a WACC of 8%, and FCF of $1.5-$2.0 billion from 2021 to 2026. The terminal value with 4% long-long term growth is equal to $63 billion.
For further details see:
Microchip Technology: FCF Generation And Undervalued