BofA Securities has adjusted its price target for Texas Instruments (NASDAQ: TXN), reducing it to $215 from $220, while maintaining a Neutral rating on the stock.
The revision reflects concerns over the company's sales growth and margin pressures. Texas Instruments, known for its industrial semiconductor solutions, has not shown the anticipated uplift in sales, particularly in its largest segment, which continues to see a decline.
The analyst from BofA Securities highlighted several factors contributing to the decision to lower the price target. The ongoing decline in industrial sales, the impact of rising depreciation on gross margins for the calendar year 2025, and the forecast that even with a potential increase in sales in the second and third quarters of 2025, the year-over-year growth would likely not exceed 10-12%. This projection falls short of the mid-teens growth that had been anticipated by the market.
Furthermore, the analyst pointed out that the recent strength in China might be a result of advanced purchases ahead of the U.S. elections and possible new tariffs, which could inflate sales figures temporarily. This surge includes a 20% quarter-over-quarter increase in the second quarter and a 10% increase in the third quarter, with the automotive sector showing even stronger growth.
Despite these concerns, Texas Instruments has been recognized for expanding its manufacturing capabilities, which could potentially offer low-cost capacity when the market enters the next upcycle. However, the analyst has adjusted the calendar year 2025 earnings estimate slightly downward by 2%, setting it at $5.55 from the previous $5.69.
In other recent news, Texas Instruments Incorporated (NASDAQ:TXN) (TI) reported a mixed bag in its Q3 2024 earnings call. The global semiconductor company recorded a 9% sequential revenue increase to $4.2 billion, despite an 8% year-over-year decline. Analog revenue decreased by 4% and Embedded Processing saw a significant 27% drop. On the flip side, growth was reported in Personal Electronics, Enterprise Systems, and Communication Equipment sectors.
The company's CFO, Rafael Lizardi, noted a gross profit of $2.5 billion and net income of $1.4 billion, equivalent to $1.47 per share. Over the past year, TI returned $5.2 billion to shareholders, which included a 5% dividend increase. Looking forward, TI projects revenues for Q4 to be between $3.7 billion and $4 billion, with earnings per share estimated to range from $1.07 to $1.29.
InvestingPro Insights
To complement the analysis provided by BofA Securities, recent data from InvestingPro offers additional context on Texas Instruments' (NASDAQ:TXN) financial position and market performance. The company's market capitalization stands at $184.28 billion, reflecting its significant presence in the semiconductor industry.
An InvestingPro Tip highlights that Texas Instruments has raised its dividend for 21 consecutive years, demonstrating a strong commitment to shareholder returns despite the current market challenges. This is particularly relevant given the analyst's concerns about sales growth and margin pressures. The company's dividend yield is currently at 2.8%, which may be attractive to income-focused investors in the current economic climate.
Another InvestingPro Tip notes that Texas Instruments is trading at a high earnings multiple, with a P/E ratio of 33.56. This valuation metric aligns with the BofA Securities analyst's decision to lower the price target, as it suggests the stock may be priced optimistically relative to its earnings potential.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips that could provide further insights into Texas Instruments' financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.