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Investing.com - UBS maintained its Buy rating and $245.00 price target on Texas Instruments (NASDAQ:TXN), a $164 billion semiconductor giant with $16.7 billion in trailing twelve-month revenue, following the company’s recent revenue guidance.
Texas Instruments guided revenue to $4.4 billion at the midpoint, which UBS analyst Timothy Arcuri noted was in line with most investor expectations, though weak implied gross margins confirmed some investor concerns ahead of the report. According to InvestingPro data, the company maintains a healthy gross margin of 58.03%, though pressure remains.
The semiconductor company’s business recovery pace has slowed from above-seasonal to more in-line with normal seasonal patterns as industrial customers had previously built buffer stock amid trade uncertainty.
UBS acknowledged that bears will continue to point to gross margin pressure from depreciation related to Texas Instruments’ counter-cyclical capital expenditure actions, but emphasized that the stock appears more correlated to free cash flow than gross margin.
The firm believes the aftermarket pullback to approximately $165 represents a significant buying opportunity, suggesting the current price is discounting zero growth, while noting that if the market applies a low 20s EV/FCF multiple, the stock is now discounting approximately $7.75 FCF per share. Based on current InvestingPro Fair Value calculations, the stock appears to be trading near its fair value, with 12 additional key insights available on InvestingPro.
In other recent news, Texas Instruments reported third-quarter results that exceeded expectations. However, the company issued fourth-quarter revenue guidance of $4.40 billion, which falls short of the consensus estimate of $4.52 billion. The company attributed this to ongoing macroeconomic and geopolitical uncertainties, although it noted that customer inventory depletion is now complete. Several analyst firms have adjusted their price targets for Texas Instruments following these developments. KeyBanc lowered its price target to $220, citing strong third-quarter results but reduced fourth-quarter expectations. Cantor Fitzgerald decreased its target to $170, pointing to gross margin pressures and ongoing demand softness. Rosenblatt also reduced its target to $200, mentioning a charge related to the closure of older fabrication facilities. Morgan Stanley and Jefferies both lowered their targets to $175 and $180, respectively, due to concerns about seasonal growth and recovery delays.
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