Friday – Mizuho has updated its outlook on Texas Instruments (NASDAQ:), raising the price target to $200 from the previous $190, while maintaining a neutral rating on the stock. The firm adjusted its forecast for Texas Instruments’ December quarter revenue and earnings per share (EPS) from $4.1 billion and $1.37 to $3.96 billion and $1.25, respectively. This revision falls slightly below the consensus estimates, which stand at $4.08 billion in revenue and $1.32 in EPS.
The adjustment reflects a more conservative stance on the company’s fiscal year 2025 (F25E) and 2026 (F26E) expectations as well. The firm’s new forecast for F25E is $17.5 billion in revenue and $6.25 in EPS, down from $17.8 billion and $6.35, and for F26E, the forecast has been revised up from $19.7 billion and $7.44 to $20 billion and $7.73 in revenue and EPS, respectively.
The revised price target of $200 is based on a 32.0 times multiple of the firm’s F25E EPS, which represents an increase from the previous multiple of 29.9 times. This valuation is considered fair for Texas Instruments, as it is seen as a blue-chip leader in the analog semiconductor space. The new target is also aligned with the broader semiconductor sector’s expansion, which is now trading at approximately 22.7 times earnings, up from around 20 times.
Mizuho’s stance reflects a view that Texas Instruments is fairly valued at a premium given its status in the industry. The firm’s decision to maintain a neutral rating suggests that while they recognize the company’s leadership position, the current stock price adequately reflects Texas Instruments’ future prospects as per their revised estimates.
In other recent news, Texas Instruments has been at the center of several important developments. The company’s third-quarter earnings report for 2024 is anticipated to show revenue of $4.10 billion, a gross margin of 58.2%, and earnings per share (EPS) of $1.36, according to Bernstein SocGen Group. However, the firm maintains an Underperform rating for Texas Instruments, citing concerns about the company’s fourth quarter and the potential overestimation of forward-looking financial estimates by the market.
Texas Instruments has raised its quarterly cash dividend by 5% for the 21st consecutive year, demonstrating a consistent commitment to shareholder returns. The company has also provided its capital expenditure projections for fiscal year 2026 and beyond, forecasting a free cash flow per share by 2026 to range between $8 to $12, which exceeds analyst consensus estimates.
Analyst firms have offered varied responses to these developments. Rosenblatt has maintained a Buy rating on Texas Instruments, highlighting the company’s steady booking and loading improvement. TD Cowen, on the other hand, has maintained a Hold rating, while Benchmark and KeyBanc have reiterated a Buy and Overweight rating respectively.
Additionally, Texas Instruments is under scrutiny by the U.S. Senate Permanent Subcommittee on Investigations regarding the use of its semiconductors in Russian weaponry. The hearing aims to evaluate the company’s compliance with export controls designed to prevent Russia from obtaining American technology.
InvestingPro Insights
Adding to Mizuho’s analysis, InvestingPro data provides further context on Texas Instruments’ financial position and market valuation. The company’s market capitalization stands at $181.06 billion, reflecting its significant presence in the semiconductor industry. TXN’s P/E ratio of 34.38 aligns with Mizuho’s valuation multiple of 32.0 times F25E EPS, indicating that the market is pricing in strong growth expectations.
InvestingPro Tips highlight Texas Instruments’ strong dividend history, having raised its dividend for 21 consecutive years and maintained payments for 54 years. This underscores the company’s financial stability and commitment to shareholder returns, which may justify its premium valuation in the semiconductor sector.
However, it’s worth noting that analysts anticipate a sales decline in the current year, with revenue growth at -14.5% over the last twelve months. This aligns with Mizuho’s conservative stance on near-term revenue projections. Despite this, TXN remains profitable, with a gross profit margin of 59.36% and an operating income margin of 36.17% over the last twelve months.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Texas Instruments, providing deeper insights into the company’s financial health and market position.
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