Truist Securities on Friday raised its price target on Microchip Technology (NASDAQ:MCHP) to $68.00 from $60.00, while keeping a Hold rating on the semiconductor company. The updated target remains below Microchip's prevailing market price of $75.23, and under the high end of the analyst consensus, $100, with InvestingPro data cited as indicating the shares are currently trading above their Fair Value.
The firm attributed its target increase to what it described as "good results and outlook" stemming from Microchip's fiscal fourth-quarter performance and a first-quarter guidance update that slightly exceeded consensus expectations. Those outcomes dovetail with InvestingPro data showing 16 analysts have raised earnings estimates for the upcoming period, and with the view that Microchip is expected to return to profitability this fiscal year.
Margins and operational recovery
Truist highlighted that Microchip continues a "clean-up" process in the post-PSP era as the company works through an inventory overhang. The firm pointed to total gross profit margins of 61% that are tracking toward product gross profit margins near 66% as evidence of the recovery in profitability.
Looking further out, Truist projects Microchip can reach an operating profit margin of about 40% once quarterly revenue normalizes around $1.5 billion. That operating margin target underpins the firm's calendar year 2027 earnings-per-share estimate of $3.58. In setting the new price target, Truist applied a 19x price-to-earnings multiple to its 2027 forecast - a multiple that was increased in line with peer valuations - while noting that the market appears to have already priced much of the company's recovery into the stock.
Other analyst moves after the quarter
Microchip's recent results and guidance prompted a range of responses across the analyst community. The company reported fiscal third-quarter 2026 revenue of $1,186.0 million, a sequential rise of 4.0% that slightly exceeded Stifel's estimate. Several firms cited the quarter and the stronger-than-expected guidance when adjusting their views:
- Needham said the fiscal fourth-quarter guidance topped expectations and raised its price target to $84.00 while maintaining a Buy rating.
- Cantor Fitzgerald characterized the quarter as "solid," reiterated an Overweight rating and kept a $100.00 price target, highlighting the better-than-expected results and the raised guidance.
- KeyBanc maintained an Overweight rating with a price target of $85.00, noting results aligned with Microchip's positive pre-announcement.
- Stifel reiterated its Buy rating and a $90.00 price target, pointing to revenue results that validated its forecast.
- TD Cowen moved in the opposite direction on valuation, lowering its price target to $70.00 while citing a gradual demand recovery and stronger June quarter bookings versus March; the firm noted that Microchip's guidance may not have matched more elevated market expectations.
What this means for investors and the sector
The mix of raised price targets, reiterations of Buy and Overweight stances, and a Hold from Truist reflects divergent views on how much of Microchip's rebound is already reflected in the share price. Key metrics cited by Truist - gross margins approaching product-level norms and a targeted 40% operating margin at normalized volumes - point to improving profitability drivers. At the same time, the firm's observation that the stock trades above Fair Value underscores valuation risk.
Analyst reactions illustrate how the semiconductor sector and related technology hardware markets remain sensitive to near-term demand dynamics, inventory adjustments and guidance clarity. Firms that raised targets pointed to the stronger-than-expected quarter and guidance; others that trimmed targets flagged a slower-than-anticipated demand recovery and the potential for guidance to underwhelm heightened market hopes.
Bottom line
Truist's move to $68 represents a tactical increase based on improving results and margins, but the Hold rating and the target's position below the share price signal the firm believes much of the recovery is already priced in. The range of analyst reactions after Microchip's quarter - from raised targets and maintained Buy/Overweight ratings to a reduced target from TD Cowen - highlights the ongoing debate over the pace of demand normalization, margin sustainability and valuation within the semiconductor sector.