BUZZ - Microchip shares plunge on weak margin outlook, underperforming the chip sector

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November 6 - ** Shares of U.S. semiconductor supplier Microchip Technology (Microchip) MCHP.O fell 8.33% to $59.5, on track for the biggest single-day drop since June as market concerns over its profit margin outlook overshadowed the overall rebound in the semiconductor sector (link)

** The company on Thursday forecast (link) third-quarter gross margins would be between 64% and 65%, below analysts’ average estimate of 66.2%—data compiled by LSEG

** CEO Steve Sanghi said supply constraints are limiting the company’s outlook, with bottlenecks at foundries, packaging and testing partners, and in-house operations preventing some orders from being fulfilled

** At least 12 brokerages cut their price targets; JPMorgan lowered its target from $120 to $100, saying that despite strong demand, supply limits and rising costs are constraining gross margin expansion

** Of 27 analysts, 14 rated the stock as “Buy”, 7 as “Strong Buy”, and 6 as “Hold”; the median price target is $88—LSEG

** Including today’s move, the stock is down 6.5% so far this year

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