Microchip Technology Earnings Beat, Positive Guidance Lifts Semiconductor ETFs | ETF Trends

Microchip Technology (NasdaqGS: MCHP) jumped Tuesday, lifting semiconductor sector-related exchange traded funds, after the leading provider of smart, connected, and secure embedded control solutions beat Wall Street estimates and provided positive guidance for the quarter ahead.

On Tuesday, the iShares PHLX Semiconductor ETF (NasdaqGS: SOXX) increased 2.4% and the VanEck Vectors Semiconductor ETF (SMH) advanced 2.5%.

Meanwhile, Microchip Technology shares surged 6.2%. MCHP makes up 4.4% of SOXX’s underlying portfolio and 3.9% of SOXQ.

The tech company late Monday revealed it earned an adjusted $1.35 a share on sales of $1.84 billion over its fiscal fourth quarter ended March 31, Investor’s Business Daily reports. In comparison, analysts polled by FactSet expected Microchip earnings of $1.25 per share on sales of $1.82 billion. Microchip’s earnings surged 45% year-over-year while sales jumped 26%.

“We delivered yet another quarter of strong growth and profitability during the March quarter and closed out a record fiscal year 2022 with outstanding revenue growth of 25.7% compared to the prior year’s fourth fiscal quarter. Our March quarter results came in near the high end of our guidance range, and we achieved new records across key operating non-GAAP metrics,” Ganesh Moorthy, president and chief executive officer, says in a press release.

“Overall business conditions remained very strong in the March quarter with high levels of bookings and record backlog for product to be shipped over multiple quarters, accentuated by our Preferred Supply Program, which continues to be greater than 50% of our aggregate backlog and more than 100% of our backlog in the most constrained capacity areas. As it has been throughout fiscal 2022, in the March quarter demand outpaced the capacity improvements we implemented, resulting in our unsupported backlog continuing to climb and our lead times remaining stretched. Based on the magnitude of the demand-supply imbalance, the size of our non-cancellable backlog, the rate at which new backlog continues to come in, and the pace at which we can bring new capacity online, we expect to remain supply-constrained throughout 2022 and into 2023,” Moorthy adds.

The broader semiconductor sector has been pummeled during the latest market pullback, with growth-related stocks taking the brunt of the beating. The recent market retreat has sent valuations on chip stocks to some of their lowest levels in two years, which may help bring back bargain hunters.

Allspring Global Investments argues that investors are rotating out of tech stocks indiscriminately, and “semiconductor stocks look pretty attractive as a result. The valuations reflect concerns about whether there’s a huge correction looming in semiconductor stocks in the next six to 12 months, and we don’t think there is,” Barchart.com reports.

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