Understanding Today’s Plunge: Why Microchip Technology (MCHP) Shares Are Taking a Hit

Today, Microchip Technology (NASDAQ:MCHP) saw its shares drop by 5.9% after Texas Instruments, a competitor, announced weak quarterly results. They reported rising inventory and slowing demand in key markets. Their earnings outlook for the next quarter wasn’t promising either. This news raised concerns about demand, particularly in Japan and Europe, where the auto and industrial sectors struggled. The only bright spot was China’s strong auto and smartphone markets, which helped boost their overall revenue and earnings. But still, it was a tough quarter that added to worries in the semiconductor world.

The stock market often reacts strongly to news, and big drops can sometimes signal a chance to buy good stocks at lower prices. Is this a good time for Microchip Technology?

Microchip’s stock isn’t very volatile, with only 9 instances of over 5% movement in the past year. This drop suggests that investors view today’s news as significant, though it may not change their long-term view of the company.

A major drop earlier this year occurred when the company projected revenue near the low end of its previous estimates for the December 2024 quarter. They also announced plans to close their Tempe wafer fabrication plant due to excess inventory.

Since the start of the year, Microchip is down about 1.7%. At $55.92 per share, it remains 43.8% below its peak of $99.49 reached in May 2024. For those who invested $1,000 in Microchip five years ago, their investment is now worth around $1,043.

When a company has extra cash, buying back its own shares can be a smart move, provided the price is right. This creates an opportunity for investors.