Why Longbow Research Upgrades Microchip Technology and Texas Instruments Stocks

Continued strength in semiconductor chip bookings and “extremely lean” forward-looking inventory across the supply chain suggest increasing lead times and zero destocking risk on the horizon, according to Longbow Research.

The Semiconductor Analyst: Nikolay Todorov upgraded the ratings for Microchip Technology Inc. MCHP and Texas Instruments Incorporated TXN from Neutral to Buy, while establishing price targets of $186 and $220, respectively.

The Semiconductor Thesis: The semiconductor cycle seems to be in the “middle innings” and the gap between demand and supply is unlikely to close in 2021, Todorov said in the upgrade note.

Referring to Microchip Technology, the analyst said there is “earnings upside from incremental GM and op leverage, and multiple re-rating to in-line with peer avg. (from 10% discount today) driven by balance sheet deleveraging and scaling of shareholder return initially via rapidly growing dividend and later by market buybacks.”

Regarding Texas Instruments, Todorov wrote, “We think the combination of higher product availability, and now more direct-to-customer sales (63% of 4Q sales were direct vs less than 40% a year ago), will make TI more nimble and allow it to pick incremental share near term.”

MCHP Price Action: Shares are down 2.00 % to $151.77 at time of publication Tuesday.
TXN Price Action: Shares are down 0.19% to $179.75 at time of publication Tuesday. 

(Photo: Texas Instruments)