It's been a sad week for Microchip Technology Incorporated (NASDAQ:MCHP), who've watched their investment drop 13% to US$75.43 in the week since the company reported its first-quarter result. Revenues were US$1.2b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$0.24 were also better than expected, beating analyst predictions by 13%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

After the latest results, the consensus from Microchip Technology's 22 analysts is for revenues of US$4.93b in 2025, which would reflect a concerning 25% decline in revenue compared to the last year of performance. Statutory earnings per share are forecast to crater 70% to US$0.76 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$5.48b and earnings per share (EPS) of US$1.30 in 2025. Indeed, we can see that the analysts are a lot more bearish about Microchip Technology's prospects following the latest results, administering a real cut to revenue estimates and slashing their EPS estimates to boot.

The consensus price target fell 5.8% to US$95.68, with the weaker earnings outlook clearly leading valuation estimates. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Microchip Technology analyst has a price target of US$115 per share, while the most pessimistic values it at US$80.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Microchip Technology shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 32% by the end of 2025. This indicates a significant reduction from annual growth of 11% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 18% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Microchip Technology is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Microchip Technology's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Microchip Technology analysts - going out to 2027, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Microchip Technology that we have uncovered.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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