Microchip Technology stock (NASDAQ: MCHP) has seen an impressive rise of 8% over the past week and currently trades at around $156 per share. The stock rally was driven by the jump in the broader indices, supported by the announcement of a 2-for-1 stock split this week and strong Q1 ’22 earnings (MCHP’s fiscal year ends in March) reported at the start of August. Microchip reported revenues of $1.57 billion, a decent jump from $1.31 billion in Q1 ’21. COGS and operating expenses rose at a much slower rate, driving an almost 1.7x jump in operating income to $369 million. Despite a $44 million tax expense, compared to a $34 million tax benefit for the same period last year, EPS jumped from $0.50 to $0.92.
After the recent rally, will Microchip stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for Microchip stock average close to 4.1% in the next one-month (21 trading days) period after experiencing a 8.1% rise over the previous one week (five trading days) period. But how would these numbers change if you are interested in holding Microchip stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Microchip Technology stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
MACHINE LEARNING ENGINE – try it yourself:
IF Microchip stock moved by -5% over five trading days, THEN over the next 21 trading days, Microchip stock moves an average of 5.5 percent, with a decent 67.3% probability of a positive return.
Some Fun Scenarios, FAQs & Making Sense of Microchip Stock Movements:
Question 1: Is the average return for Microchip stock higher after a drop?
Consider two situations,
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Case 1: Microchip stock drops by -5% or more in a week
Case 2: Microchip stock rises by 5% or more in a week
Is the average return for Microchip stock higher over the subsequent month after Case 1 or Case 2?
Microchip stock fares better after Case 1, with an average return of 5.5% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.3% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Microchip stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold Microchip stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For Microchip stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
Microchip’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Microchip stock by changing the inputs in the charts above.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market since 2016.