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Investing.com --Microchip Technologyshares have risen more than 4% premarket on Tuesday after the company said late Monday that quarterly revenue would come in well above prior guidance, signalling strengthening demand and progress on its recovery plan.
The company now expects third-quarter fiscal 2026 net sales of about $1.185 billion, compared with its original range of $1.109 billion to $1.149 billion.
Chief Executive Steve Sanghi saidMicrochipis seeing “a fairly broad-based recovery in most of our end markets,” citing improved inventory levels at distributors and direct customers as well as new designs entering production.
He added that “bookings activity was very strong in the December quarter despite a holiday-filled quarter,” and that backlog heading into March “started out much better” than the December period.
Sanghi commented that the firm has made “substantial progress on most elements of our nine-point recovery plan,” including a meaningful reduction in internal inventory that should lower write-offs.
He also noted that factories are preparing to ramp up in the March quarter, which should reduce underutilization charges. “We look forward to a very good calendar year 2026,” he said.
Following the release, Needham analyst Rajvindra Gill raised his price target to $77 from $75 and reiterated a Buy rating, saying the update marks the second positive revision this quarter.
Gill noted that revenue is now expected to rise about 4% quarter-on-quarter and highlighted “robust” December bookings and a stronger starting backlog for the March quarter. He added that gross margin should improve as factory utilization recovers.
Morgan Stanley analyst Joseph Moore said that they “certainly acknowledge the pre-announcements and positive cyclical indications, but the forward P/E multiple has remained above one standard deviation since January 2024, and the stock is trading at our CY27 multiple of 21x AH.
“Moreover, higher expectations reflect an increasingly challenging setup, and while short-term visibility appears to be improving, the longer-term cyclical outlook continues to hold risk - particularly as global instability appears to be the new normal,” he concluded.
