Shares of Microchip Technology Inc. sank Wednesday morning after a JPMorgan analyst downgraded the company, saying it will likely be affected by a slowdown in the Chinese market and citing the stock's high valuation.
The stock lost $2.38, or 7 percent, to $31.80 after the opening bell.
JPMorgan analyst Christopher Danely lowered his rating to "Neutral" from "Overweight" on Microchip, which makes semiconductor-related products.
Many companies are seeing demand drop after last month's massive earthquake in China, and many hope conditions will improve in time for the Beijing Olympics in August, he said.
Yet in the meantime, the slowdown will likely hurt Chandler, Ariz.-based Microchip, which derives about 20 percent of its revenue from China, he said.
"It appears most of the country has gone in to mourning and purchases have slowed dramatically for consumer goods," Danely said in a note to clients.
Danely encouraged investors to "take profits in Microchip stock." The stock has gained about 9 percent so far in 2008.
A company representative was not immediately available for comment.
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