Needham boosts price target to $84, maintains Buy
Needham has increased its price objective for Microchip Technology to $84.00 from $77.00 and left its recommendation at Buy, pointing to signs of improving end-market demand. The new target is modestly above Microchip's most recent share price of $78.04, with the stock trading close to a 52-week high of $81.43 after returning 51.58% over the past year.
Quarterly results and guidance
According to Needham's review, Microchip's fiscal third-quarter revenue came in line with the company's updated outlook. The firm also noted that Microchip provided fiscal fourth-quarter guidance that exceeded market expectations. Complementing Needham's view, InvestingPro data cited in the analysis indicates 16 analysts have recently revised their earnings forecasts higher for the upcoming period.
Demand signals: bookings, backlog and book-to-bill
Needham emphasized strengthening end-market demand, highlighting robust bookings and backlog in December and January. The firm reported the company's book-to-bill was well above 1.0 in the fiscal third quarter, a metric it sees as evidence of improving order intake relative to shipments.
Margin drivers and inventory dynamics
The analyst noted better-than-expected non-GAAP gross margin performance. Third-quarter margin upside was attributed in part to stronger licensing revenue, while expected margin improvement in the fourth quarter was tied to the normalization of inventory reserve charges.
Design wins and future revenue potential
Microchip has secured three design awards for its PCIe Gen 6 switches, including a sizeable award described as worth more than $100 million. Production for that award is expected to begin in the first quarter of calendar year 2027, according to the information in Needham's note.
Earnings and market reaction
Microchip reported fiscal third-quarter 2026 results that exceeded analyst expectations, delivering EPS of $0.44 versus a consensus $0.42, and revenue of $1.19 billion compared with an anticipated $1.17 billion. Despite the beats in both earnings and revenue, the stock experienced a slight decline in aftermarket trading.
This report presents the facts disclosed in Needham's note and Microchip's reported results, without additional commentary beyond the items summarized above.