investing

The Best Stock in Arizona: Microchip Technology

We analyzed publicly traded companies across the Grand Canyon State to identify the best stock in Arizona to buy now.

We scoured the nation to identify the best stock in every state. Microchip Technology (symbol MCHP) is the publicly traded company we picked in Arizona. The company headquarters is located in Chandler.

A word of caution: Since we selected a single stock from each state (plus one from D.C), and choices in some states are sparse, a few of our picks are best suited to investors comfortable with a higher degree of risk. This is not necessarily one of our 51 favorite stocks in the entire U.S., in other words.

Microchip Technology’s business is a niche within a niche. Within the world of semiconductors, Microchip manufacturers microcontrollers (or MCUs, for microcontroller units)—chips that act as “brains” in electronic devices.

Microchip Technology by the Numbers

  • Headquarters: Chandler
  • Share price: $80.07
  • Market value: $18.4 billion
  • Price-earnings ratio: 16

(Prices and data are as of June 22, 2017)

Microchip’s specialty is 8-bit MCUs that work in simple devices, such as electric razors, but the company also has smaller shares in more-complex 16- and 32-bit MCUs, which you might find in implanted medical devices. In recent years, as demand for semiconductors has increased, the company has expanded its market share across all three MCU markets through acquisitions—most recently buying chipmaker Atmel for $3.6 billion in 2016. Microchip estimates that the purchase will add $1 to earnings per share starting in the fiscal year that begins in April 2018. The company earned $3.67 a share in the year that ended March 31, according to Zacks Investment Research.

Over the past 12 months, Microchip’s shares rose 57%, compared with a 46% gain for the average semiconductor firm. Yet even after the run-up, Microchip trades at just 16 times estimated earnings for the next 12 months, while its average peer trades at 18 times earnings. Given the strength of Microchip’s business and its growth prospects, CFRA analyst Angelo Zino rates the stock a “buy” and sees it hitting $90 over the next 12 months.

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