Friday – Mizuho updates its outlook on Texas Instruments (NASDAQ:), increasing its price target to $200 from $190, while maintaining a Neutral rating on the stock. The company revised its December quarter revenue and earnings per share (EPS) estimates for Texas Instruments to $3.96 billion and $1.25 from $4.1 billion and $1.37, respectively. This revised amount is slightly below consensus estimates of $4.08 billion in revenue and $1.32 in EPS.
This adjustment also reflects the company’s more conservative stance on its fiscal year 2025 (F25E) and fiscal year 2026 (F26E) expectations. The company’s new forecast for F25E is for revenue of $17.5 billion and EPS of $6.25, revised down from $17.8 billion and $6.35, and for F26E, revenue of $19.7 billion and EPS of $7.44, revised down from $17.8 billion and $6.35. , sales were revised upward to $20 billion and EPS to $7.73.
The revised $200 price target is based on the company’s F25E EPS of 32.0x, representing an increase from the previous 29.9x. We believe this rating is fair, as Texas Instruments is considered a blue-chip leader in analog semiconductors. The new target also coincides with expansion in the broader semiconductor sector, which currently trades at a P/E of about 20x to about 22.7x.
Mizuho’s stance reflects its view that Texas Instruments is fairly overvalued given its position in the industry. The company’s decision to maintain a neutral rating recognizes the company’s leadership position while ensuring that its current stock price adequately reflects Texas Instruments’ future outlook based on revised estimates. suggests.
In other recent news, Texas Instruments has been at the center of several important developments. Bernstein SocGen Group says it expects to report revenue of $4.1 billion, gross margin of 58.2% and earnings per share (EPS) of $1.36 in its third quarter 2024 financial report. . However, the company maintains its rating on Texas Instruments at “underperform,” citing concerns about the company’s fourth quarter and the possibility that the market’s future financial forecasts are overstated.
Texas Instruments has increased its quarterly cash dividend by 5% for 21 consecutive years, demonstrating a consistent commitment to shareholder returns. The company also provided forecasts for capital expenditures beyond fiscal year 2026, projecting free cash flow per share to be in the range of $8 to $12 through 2026, which is in line with analyst consensus estimates. exceeds.
Analyst firms have had mixed reactions to these developments. Rosenblatt maintained a “buy” rating on Texas Instruments, highlighting the company’s steady improvement in bookings and capacity. Meanwhile, TD Cowen maintained a hold rating, while Benchmark and KeyBank reiterated buy and overweight ratings, respectively.
Additionally, Texas Instruments is under scrutiny by the US Senate Permanent Subcommittee on Investigations regarding the use of semiconductors in Russian weapons. The hearing is aimed at assessing the company’s compliance with export controls designed to prevent Russia from acquiring U.S. technology.
Investment Pro Insights
In addition to Mizuho’s analysis, InvestingPro’s data provides further context on Texas Instruments’ financial health and market valuation. The company’s market capitalization has reached $181.06 billion, reflecting its large presence in the semiconductor industry. TXN’s P/E ratio of 34.38 is in line with Mizuho’s valuation multiple of 32.0x F25E EPS, indicating that the market is pricing in strong growth expectations.
InvestingPro Tips covers Texas Instruments’ strong dividend history, with 21 consecutive years of dividend increases and 54 years of consistent payouts. This highlights the company’s financial stability and commitment to shareholder returns, and may justify the company’s premium valuation in the semiconductor sector.
However, it’s worth noting that the last twelve months saw revenue growth of -14.5%, and analysts expect sales to decline this year. This is consistent with Mizuho’s conservative stance on short-term earnings forecasts. Despite this, TXN continues to grow profits, with gross margin of 59.36% and operating margin of 36.17% over the past twelve months.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on Texas Instruments, providing deeper insight into the company’s financial health and market position.
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