QS Research · Michael Burry's Scion Capital analyst template · 2006
MICROCHIP TECHNOLOGY INC (MCHP)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: LONG
Conviction medium · base case +42% · downside -15% · upside +75%
The call is a long, but only medium conviction: the market is capitalizing trough TTM earnings (EBITDA $1.83B, EBIT $1.17B, FCF $1.46B) at 20.2x EV/EBITDA, 31.5x EV/EBIT and 43.7x P/E, while the FY2021-FY2026 cycle average is EBITDA $2.49B, EBIT $1.55B and FCF $1.95B. Applying MCHP's own 20.2x TTM EV/EBITDA to normalized $2.49B gives $50.30B EV; less ~$5.21B net debt including leases gives $45.09B equity, or $82.85/share (+41.7%) on 544.22M shares. Downside at NXPI's 12.9x is $49.42 (-15.4%) and upside at TXN's 24.5x is $102.46 (+75.4%), so the long rule is met. Leverage, preferred claims, the Q3 guidance step-down and insider selling cap conviction.
Key numbers
- Share price: $58.42
- Market cap: $31.79B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $5.60B
- EV / EBITDA (TTM): 20.2x
- P/E (TTM): 43.7x
- Price / book: 4.79x
The 15 boxes
- ✓ 1. Long-form business notes
Microchip sells embedded control silicon — mixed-signal microcontrollers, analog, FPGAs, memory and IP licensing — through a direct sales force plus distributors to roughly 101,000 customers, and owns a large share of its own wafer fabs and assembly/test, so revenue swings hit a high fixed-cost base hard. The cycle is visible in the XBRL series: revenue ran from $5.44B (FY2021) to an $8.44B peak (FY2023), fell to $4.40B (FY2025) and recovered only to $4.71B (FY2026), while operating income went $3.12B (FY2023) to $296.3M (FY2025) to $490.1M (FY2026). FY2025 net income of -$2.7M is not a clean read on the business: operating income was still $296.3M but pre-tax income was only $38.9M, so non-operating items below the operating line took essentially all of it. Between the FY2021 and FY2026 reports the company added 64-bit microprocessors and a data-center/AI interconnect line, closed Fab 2 (completed May 2025) and paused Fab 4/Fab 5 expansion through FY2027, cutting capex to $91.1M in FY2026.
- ✓ 2. Competitive advantage
The sources do not establish a clear durable moat. MCHP had strong peak-cycle margins and cash flow (FY2023 gross profit $5.70B, operating income $3.12B), but these collapsed in the downturn (FY2025 operating income $296.3M; FY2026 $490.1M), and the 10-K describes intense competition, price erosion and resource-rich rivals. The claimed advantages are technical performance, product integration and a broad portfolio/Total System Solutions; IP is expressly not assured to provide meaningful protection, and about 65% of FY2026 net sales came from outside foundries. No specific competitor, switching-cost metric or scale metric is given.
- ✓ 3. 10-Q takeaways
The September 2026 quarter (Q2 FY2026) shows a sharp cyclical recovery: net sales of $1,621.5M rose 42.2% year over year and gross margin jumped to 65.9% of net sales from 55.9%, lifting operating income to 28.6% of net sales from 7.8%. A large part of the gross-margin gain is not volume-driven: the company quantifies $97.4M of favorable inventory-reserve swing, $38.7M of high-margin licensing revenue and $24.4M of lower unabsorbed capacity charges in the quarter. Inventory in dollars rose to $1.12B at September 30, 2026 from $1.04B at March 31, 2026 with days basically flat at 184, and the six-month effective tax rate swung to 10.8% from a negative 44.4% on valuation-allowance and tax-position remeasurement items.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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