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On Wednesday, JPMorgan raised the price target for Texas Instruments (NASDAQ:TXN) to $230, up from the previous $195, while maintaining an Overweight rating on the stock.
The adjustment follows Texas Instruments' June quarter results, which showed in-line revenue with better margins and earnings, signaling the start of a cyclical recovery since the March quarter low.
The company's performance was buoyed by several markets, including personal electronics and enterprise, showing a return to seasonal demand patterns. Notably, China experienced a robust rebound, with a 20% quarter-over-quarter increase after seven consecutive quarters of revenue decline. This recovery was broad-based across Chinese end markets, which all saw double-digit percentage growth quarter-over-quarter.
For the September quarter, Texas Instruments has guided sales up by 7% quarter-over-quarter, aligning with consensus expectations and typical seasonal trends. Bookings have improved for two consecutive quarters, and there has been a decline in backlog cancellations and pushouts. This pattern suggests a sustained multi-quarter revenue recovery profile for the company.
On the supply side, Texas Instruments is expanding its manufacturing footprint ahead of demand, with inventory days at the higher end of the company's target range. Gross margins, which bottomed in the first half of the year, are expected to see modest expansion by year-end due to improved revenue and fixed cost absorption.
The financial outlook for Texas Instruments is also positively influenced by the US investment tax credit initiative, which is anticipated to yield a $1 billion cash benefit for the company, thereby improving free cash flow for the current year.
This benefit may also offset some capital expenditure in 2025 and 2026. Based on these developments, JPMorgan has revised its forward estimates and set a December 2025 price target of $230.
In other recent news, Texas Instruments Incorporated (NASDAQ:TXN) (TI) has revealed a mix of challenges and growth in its latest earnings call, reporting a second-quarter revenue of $3.8 billion, marking a 4% sequential increase but a 16% decrease compared to the previous year.
Despite declines in the Analog and Embedded Processing segments, TI is forecasting revenue between $3.94 billion to $4.26 billion for the upcoming quarter, with earnings per share estimated at $1.24 to $1.48.
This outlook is bolstered by sequential growth in China and strong performance in the personal electronics sector, as well as planned investments in capacity, particularly within the industrial and automotive markets.
On another note, Evercore ISI has updated its outlook on Texas Instruments, raising the price target to $255 from the previous $225 while maintaining an Outperform rating on the stock. The firm's increased confidence is based on early signs of a significant rebound in earnings expected within the next two to three quarters.
Evercore ISI's analysis suggests that Texas Instruments is currently shipping 27% below consumption due to the supply chain depleting inventories, but this is anticipated to change, with a notable 20% quarter-over-quarter growth in China revenues seen as a precursor to global trends once the inventory correction phase concludes.
These recent developments indicate a cautiously optimistic outlook for Texas Instruments, with a focus on strategic investments and growth in key markets. Future expectations include a 7% overall growth in Q3 revenue, as well as an anticipated strong Q3 performance in the personal electronics sector. The company's China business, which grew about 20% sequentially in Q2, is also showing signs of recovery.
InvestingPro Insights
In light of JPMorgan's updated price target for Texas Instruments (NASDAQ:TXN), it's pertinent to consider additional context provided by InvestingPro. Texas Instruments, known for its consistent shareholder returns, has a track record of raising its dividend for 20 consecutive years, emphasizing its financial stability. Furthermore, the company's stock is characterized by low price volatility, which might appeal to investors looking for steady performance in the unpredictable semiconductor industry.
From a financial standpoint, Texas Instruments holds a substantial market capitalization of $180.54 billion, and while analysts predict a sales decline in the current year, the company's solid gross profit margin of 61.01% for the last twelve months as of Q1 2023 indicates it maintains a strong ability to generate earnings relative to revenue. Additionally, the company's dividend yield stands at 2.62%, coupled with a dividend growth of 4.84% over the last twelve months, which could be attractive to income-focused investors.
For those interested in deeper analysis, there are over 14 additional InvestingPro Tips available, which provide a comprehensive look at Texas Instruments' financial health and market position. To explore these insights and make informed investment decisions, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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