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Investing.com - Cantor Fitzgerald has reiterated its Neutral rating on Texas Instruments (NASDAQ:TXN) while lowering its price target to $170 from $200, citing gross margin pressures and continued end-demand softness. The semiconductor giant, currently valued at $164.4 billion, is trading above its InvestingPro Fair Value, with a P/E ratio of 33x suggesting rich valuation levels.
The semiconductor company reported third-quarter results that beat expectations but issued fourth-quarter revenue guidance of $4.40 billion, below the consensus estimate of $4.52 billion. The company noted a slower-than-typical recovery due to macroeconomic and geopolitical uncertainty, though it indicated customer inventory depletion is now complete. InvestingPro data shows Texas Instruments maintains strong financial health with a current ratio of 5.81, indicating robust liquidity to manage through market cycles.
Cantor Fitzgerald highlighted gross margin concerns as the most significant issue in the report, with fourth-quarter guidance implying margins of approximately 54.5%, well below consensus expectations of 57.6% and representing a roughly 300 basis point sequential decline. The margin pressure stems from lower revenues, higher depreciation, and reduced factory loadings as the company works to prevent further inventory growth.
Texas Instruments has lowered production loadings in both the third and fourth quarters to maintain its current inventory level of $4.8 billion. Cantor Fitzgerald expects utilization to remain at these lower levels through at least the first quarter of 2026 as end-demand remains soft, continuing to pressure gross margins alongside rising depreciation costs.
Based on these factors, Cantor Fitzgerald has lowered its calendar year 2026 revenue and earnings per share estimates to $18.8 billion and $5.70, respectively, compared to consensus estimates of $19.6 billion and $6.72. The firm has also initiated 2027 projections with revenue of $21.3 billion and earnings per share of $7.50, based on an expected normalization of revenue trends. Despite near-term challenges, Texas Instruments maintains its position as a dividend aristocrat, having raised dividends for 22 consecutive years, with a current yield of 3.22%. For deeper insights into TXN’s financial health and growth prospects, including 12 additional ProTips, check out the comprehensive research report available on InvestingPro.
In other recent news, Texas Instruments reported September quarter revenue of $4.74 billion, aligning closely with consensus estimates of $4.66 billion. The company also announced guidance for December quarter revenue at $4.40 billion, indicating a 7% sequential decline and falling about 2% short of consensus expectations of $4.50 billion. Following these earnings results, several analyst firms adjusted their price targets for Texas Instruments. Mizuho lowered its price target to $145, citing margin pressure, while maintaining an Underperform rating. Bernstein adjusted its price target to $160, describing the third-quarter results as "decent" and maintaining a Market Perform rating. Jefferies reduced its target to $180, noting that the broader industry recovery appears delayed. Additionally, Rosenblatt set a price target of $200, attributing the change to the closure of older fabrication facilities, while Morgan Stanley lowered its target to $175, expressing concerns about seasonal growth patterns. These developments reflect a mixed outlook for Texas Instruments among analysts.
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