uploads/2019/11/MICROCHIP.jpeg

Microchip and Match Group Stocks Lose Big After-Hours

By

Updated

Tech stocks Match Group (MTCH) and Microchip (MCHP) are trading lower in the after-hours session today. The two companies reported their quarterly earnings results today. Let’s see how they performed compared to consensus estimates—and why the stocks are losing big.

Article continues below advertisement

Microchip stock trading 7% lower after-hours

Microchip stock (MCHP) is trading at $93, down 7% in the after-hours session on November 5, 2019. The company announced its Q2 results for fiscal 2020 (which ends in March) and reported sales of $1.33 billion with EPS of $1.43. Analysts expected the company to post revenue of $1.35 billion with EPS of $1.43.

While Microchip met earnings estimates, it reported sales marginally below Wall Street consensus. In the December quarter, Microchip forecast sales between $1.204 billion and $1.311 billion with EPS between $1.12 and $1.32. Analysts expected MCHP to post sales of $1.35 billion and EPS of $1.44 in the third quarter. This lower-than-expected forecast left investors unimpressed, dragging Microchip stock lower after-hours.

Microchip optimistic about its outlook

The company’s sales fell 6.6% year-over-year while earnings declined 21% in Q2. Microchip CEO Steve Sanghi stated, “Our September quarter financial results were reasonably good despite a challenging economic environment.”

He also added, “End-market demand, which reflects sell-through activities in the distribution channel, was $8.6 million higher than GAAP (sell-in) revenue in the September 2019 quarter. As a result, distribution inventory days declined from 32 to 30 days. We have only had one quarter in the past fifteen years where our days of inventory at our distributors have been lower than the levels at the end of the September 2019 quarter.”

In the September quarter, Microchip reduced its debt balance by $315.5 million. In the last five quarters, its debt has fallen by $1.729 billion. Microchip management aims to use cash flows after dividend payments to reduce debt going forward as well.

Article continues below advertisement

Microchip and several semiconductor stocks have taken a hit from the trade wars over the last 15 months. This pressure resulted in limited customer backlog visibility. However, according to Microchip, its October bookings were their highest since June 2018, which might be a positive inflection point for the company.

Match Group stock is down 17%

Match Group announced its third-quarter results and reported sales of $541 million, meaning growth of 22% year-over-year. Its number of average subscribers was up 19% at 9.6 million while its adjusted EPS rose 16% to $0.51.

MTCH reported sales of $443.9 million and EPS of $0.44 in the third quarter of 2018. Analysts expected the company to post sales of $540.58 million and EPS of $0.42. So why is the stock trading lower despite beating consensus estimates? According to this Reuters report, MTCH forecast sales between $545 million and $55 million, below estimates of $559.3 million.

We know that Match Group has several dating platforms, including Tinder, Ok Cupid, and Plenty of Fish. The growing competition in this segment has resulted in an increase in marketing spending in the third quarter for MTCH, states Reuters.

However, investors might also be concerned about a class-action lawsuit filed by The Schall Law Firm. Match Group is accused of issuing misleading and false statements as well as the failure to disclose important information to investors.

On September 25, the FTC sued Match Group for “using exploitative marketing in the form of messaging from fake accounts to induce non-subscribers to sign up for the Company’s service.” Plus, the company is also accused of making it difficult for customers to cancel their subscriptions.

MCHP stock is now up 33% year-to-date, while MTCH stock has returned 35% in 2019, after accounting for the decline in after-hours today.

Advertisement

More From Market Realist