Citi Names Microchip Technology And Texas Instruments As 'Top Picks'

Microchip Technology Inc. MCHP and Texas Instruments Incorporated TXN were named Top Picks by Citi on Monday.

Analysts led by Christopher Danely believed the two companies “have the best combination of capital allocation, demand, and management of businesses. Both companies are diversified so we believe demand for both is driven by the overall semiconductor market, which we are positive on.”

“Microchip is our top pick in semis as the company’s share gains, high margins, management of cash, and outstanding track record on acquisitions have resulted in superior earnings growth. Microchip's MCU share has nearly doubled over the last 10 years and its analog business has grown 41 percent since 2009, versus the 6 percent growth for the overall analog industry,” according to the note.

The firm maintained a Buy rating and $58 price target on Microchip Technology which recently traded at $44.04, down 1.08 percent.

Danely also believed Texas Instruments’ “operational excellence combined with superior usage of cash will result in the highest earnings growth in our coverage universe. TI also has one of the highest payout ratios in semiconductors.”

The firm maintained a Buy rating and $63 price target on Texas Instruments which recently traded at $53.00, down 1.12 percent.