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On Thursday, Bernstein SocGen Group analysts upgraded Texas Instruments stock (NASDAQ: NASDAQ:TXN) from an Underperform rating to Market Perform. The analysts also raised their price target for the stock to $180.00 from a previous target of $140.00. According to InvestingPro data, the stock currently trades at a P/E ratio of 36x, with analyst targets ranging from $125 to $248.
The upgrade comes as Texas Instruments shares have underperformed in recent years, with a notable decline since September 2023. The stock has fallen 27% compared to the SOX index and 21% relative to the S&P 500. Despite this, the stock has seen less absolute downside than expected.
The analysts highlighted that their previous downgrade in 2023 was based on concerns about gross margin risks due to Texas Instruments’ investment processes. These concerns materialized, with 2024 consensus gross margin estimates compressing by approximately 700 basis points to 58%. Current estimates for 2025 are even lower, attributed to increased depreciation and underutilization. InvestingPro analysis reveals the company maintains strong financial health with a current ratio of 5.26x and operates with moderate debt levels.Want deeper insights? InvestingPro subscribers have access to 14 additional key tips about Texas Instruments and comprehensive financial analysis.
However, the analysts noted that these issues seem to have played out, and with capital expenditures decreasing, free cash flow per share is expected to increase soon. This adjustment in expectations contributed to the decision to upgrade the stock rating and raise the price target. The company’s last twelve months’ free cash flow stands at $1.46 billion, with a return on invested capital of 16%.
In other recent news, Texas Instruments reported first-quarter revenue of $4.07 billion, surpassing Stifel’s estimate of $3.90 billion. The company has provided a second-quarter revenue forecast with a midpoint of $4.35 billion, indicating sequential growth and exceeding Stifel’s projection. Texas Instruments also issued $1.2 billion in notes, with $550 million due in 2030 and $650 million due in 2035, as part of its corporate financing activities. UBS and Benchmark both adjusted their price targets for Texas Instruments, with UBS lowering it to $215 and Benchmark to $200, while maintaining Buy ratings. Stifel and TD Cowen maintained Hold ratings with a price target of $160, citing strong performance but also noting uncertainties related to tariffs and market conditions. Analysts from both firms acknowledged the company’s strong recent performance and optimistic guidance, despite concerns about future visibility. Texas Instruments’ positive results and outlook are seen as indicators of a broader cyclical recovery in the semiconductor industry. The company’s position in the industrial market and ongoing inventory adjustments by customers are expected to provide some stability amid the challenges.
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