Microchip Technology Incorporated

Microchip Technology Incorporated (NASDAQ: MCHP) is a leading developer of embedded control solutions that are smart and secure. Customers can generate optimal designs with easy-to-use development tools and extensive product selection, decreasing risk while cutting overall system cost and time to market. More than 122,000 customers use the company's products in the industrial, automotive, consumer, aerospace and defense, communications, and computing areas.

Key Highlights:

• The company reported a 29.98% increase in net sales to USD 1.76 billion in Q3FY22 (ended December 31, 2021) compared to USD 1.35 billion in Q3FY21.
• MCHP reported a significant increase in net income to USD 352.8 million in Q3FY22 from USD 26.2 million in Q3FY21.
• It operates at a higher EBITDA and net margins of 46.4% and 20.1% in Q3FY22 compared to an industry median of 28.1% and 18.3%, respectively.
• However, its debt/equity ratio is significantly higher to 1.36x as of Q3FY22 than the industry median of 0.23x.
• The stock is currently trading below its key short-term (50-day) and long-term (200-day) DMA support levels, indicating a bearish trend.
• It is leaning towards the lower band of the 52-week range of USD 64.26 to USD 90.00.
• Its stock price has declined 20.00% and 15.21% in the past three and six months, respectively.

Conclusion: Considering the macro headwinds, highly leveraged balance sheet, and other technical indicators, we recommend a "Watch" rating on the stock at the closing price of USD 68.13, down 1.32% as of March 14, 2022.

 Three-Year Technical Price Chart (as of March 14, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Pinduoduo Inc.

Pinduoduo Inc. (NASDAQ: PDD) is a mobile-only marketplace based in China that connects several agricultural suppliers and consumers. The company's mobile platform provides a diverse selection of cheaply priced items and a communal shopping experience, making social media an effective and efficient technique for gaining and engaging customers.

Key Highlights:

• The company reported a 51.34% increase in revenues to RMB 21.51 billion in Q3FY21 (ended September 30, 2021) compared to RMB 14.21 billion in Q3FY20.
• PDD reported an increase in net income to RMB 1.64 billion in Q3FY21 vs. a loss of RMB 784.71 million in Q3FY20.
• In Q3FY21, there were 741.5 million active monthly users, up 15.25% from 643.4 million in Q3FY20.
• The company's ROE and net margins declined to 2.5% and 7.6% in Q3FY21 from 3.8% and 10.5% in Q2FY21, respectively.
• The stock is currently trading below its critical short-term (50-day) and long-term (200-day) DMA support levels, indicating a bearish trend.
• PDD's share price has remained on a bearish trend, fallen 79.00% in the past nine months and has made a new 52-week low today.

Conclusion: Considering the recent Chinese crackdown, regulatory issues, decline in profitability and unfavourable technical indicators, we recommend a "Watch" rating on the stock at the closing price of USD 25.53, down 20.54% as of March 14, 2021.

Three-Year Technical Price Chart (as of March 14, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.