On Wednesday, TD Cowen maintained its Hold rating on Texas Instruments (NASDAQ:TXN) with a steady price target of $200.00. The decision follows the company's Capital Management Day where Texas Instruments presented a revised capital expenditure strategy, suggesting a solid free cash flow (FCF) per share baseline by 2026, which is a year ahead of TD Cowen's previous forecasts.
The semiconductor company outlined its financial expectations, indicating a potential free cash flow per share floor within the next three years. Texas Instruments anticipates this financial threshold could serve as a valuation safeguard for the company's stock. However, TD Cowen expressed caution, noting that Texas Instruments' projected sales floor for 2026 is 30% higher than their estimated sales for 2024, which they consider to be an ambitious target.
According to TD Cowen, for investor sentiment to shift more positively towards Texas Instruments, there needs to be confidence that the projected $20 billion sales floor is achievable. At this stage, the firm is not convinced that the sales target is within reasonable reach, leading them to reiterate their Hold stance on the stock.
Despite the company's optimistic sales floor, TD Cowen remains reserved in their outlook. The firm's current price target of $200 reflects a cautious approach, waiting for further evidence to support Texas Instruments' ambitious sales goals. Until then, the Hold rating suggests that TD Cowen advises investors to maintain their positions without increasing their stake in the company.
In other recent news, Texas Instruments has seen substantial changes in its financial trajectory and strategic investments. The company's capital expenditure plans through 2026 reveal a commitment to spending no less than $5 billion annually, according to Truist Securities. This has led to a revised sales growth and gross profit margin estimates, with the firm adjusting its 2025 earnings per share projection for Texas Instruments to $6.40.
Analysts from Barclays (LON:BARC), Goldman Sachs (NYSE:GS), and UBS have responded positively to Texas Instruments' revised capital expenditure forecast for 2026, which aims for a flexible range between $2 billion and $5 billion. Texas Instruments also plans to construct three new facilities and expand its 300mm production capacity, securing up to $1.6 billion in funding from the U.S. CHIPS and Science Act for these constructions.
The company's projected free cash flow per share by 2026 is estimated to range from $8 to $12, surpassing the analyst consensus estimate of $6.91. This projection has led to several adjustments in stock ratings and price targets by various firms.
Citi upgraded Texas Instruments from Neutral to Buy, following an improved margin outlook. Goldman Sachs raised the company's price target to $189, while UBS reaffirmed a Buy rating on the company's stock. Deutsche Bank (ETR:DBKGn) also adjusted its price target for Texas Instruments to $200, maintaining a Hold rating. These are the recent developments for Texas Instruments.
InvestingPro Insights
Recent data from InvestingPro shows that Texas Instruments (NASDAQ:TXN) is currently trading at a high earnings multiple, with a P/E ratio of 34.9, which slightly increased to 35.74 over the last twelve months as of Q2 2024. Despite a challenging period with revenue shrinking by 14.5% in the same timeframe, the company has managed to maintain a robust gross profit margin of 59.36%. This financial stability is further underscored by Texas Instruments' impressive track record of raising its dividend for 20 consecutive years, with the dividend yield standing at 2.57% as of the latest data.
InvestingPro Tips highlight that Texas Instruments is a prominent player in the Semiconductors & Semiconductor Equipment industry, with six analysts having revised their earnings upwards for the upcoming period. This could indicate a potential upside that may not be fully reflected in the current market sentiment. Additionally, the company's liquid assets exceed its short-term obligations, showcasing a healthy balance sheet that could reassure investors of its financial resilience.
For those seeking more in-depth analysis, InvestingPro offers additional insights on Texas Instruments, including 17 more InvestingPro Tips that could help investors make more informed decisions. The comprehensive coverage on InvestingPro includes metrics that reflect the company's performance and market position, potentially providing a valuable resource for evaluating investment opportunities.
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