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On Wednesday, Texas Instruments (NASDAQ:TXN), a major semiconductor company, maintained its Peer Perform stock rating from Wolfe Research. The firm's analysis noted that Texas Instruments has been undergoing an asynchronous inventory correction across its business segments. Some segments, like personal electronics and those in China, are starting to recover, while others, including industrial and automotive, are still correcting.
During the company's Capital Management update call on August 20, 2024, Texas Instruments announced a reduction in its capital expenditure (CapEx) guidance for the calendar year 2026 from $5 billion to a range of $2 billion to $5 billion, depending on various revenue scenarios. Despite this change, Wolfe Research pointed out that Texas Instruments still faces depreciation headwinds that could impact gross margins (GMs) in 2026.
Furthermore, the firm observed that even though there is an expected improvement in the company's free cash flow (FCF) for the calendar year 2026, it does not sufficiently counterbalance the company's rich valuation.
Texas Instruments is currently trading at approximately 34 times Wolfe Research's estimated earnings per share (EPS) for the calendar year 2025 and at 30 times the bull case EPS of $6.75. This valuation is notably above the company's five-year average price-to-earnings (P/E) ratio of around 23.5 times, positioning Texas Instruments well ahead of its analog peers.
In terms of relative performance, Texas Instruments has seen its stock increase by roughly 22% over the past 12 months. This performance is compared to a 50% rise for the SOX index, a 28% increase for the S&P 500, and gains for analog peers such as Analog Devices (NASDAQ:ADI) at 27%, NXP Semiconductors (NASDAQ:NXPI) at 29%, and Microchip Technology (NASDAQ:MCHP) at 1%.
In other recent news, Texas Instruments has seen significant developments in its financial trajectory and strategic investments. The semiconductor company recently received an upgraded stock rating from Citi, moving from Neutral to Buy, based on improved margin outlooks and a reduction in its 2026 capital expenditure forecast.
This aligns with recent statements from Deutsche Bank, which also adjusted its price target for Texas Instruments to $200.00, maintaining a Hold rating on the stock.
Meanwhile, Stifel maintained a Hold rating with a $200.00 price target on shares of Texas Instruments, acknowledging a fundamental shift in the company's strategy. The company has also projected a substantial increase in its free cash flow per share by 2026, with estimates ranging from $8 to $12, surpassing the analyst consensus estimate of $6.91.
In addition, Texas Instruments' strategy includes constructing three new facilities and expanding its 300mm production capacity, a move that has been commended by Elliott Investment Management. The company has secured up to $1.6 billion in funding from the U.S. CHIPS and Science Act for the construction of new facilities. These developments highlight the company's strategic investments and financial performance.
InvestingPro Insights
As Texas Instruments (NASDAQ:TXN) navigates the challenges and opportunities within the semiconductor industry, InvestingPro data and tips offer additional context to Wolfe Research's analysis. With a market capitalization of $184.93 billion and a forward P/E ratio of 34.9, Texas Instruments is demonstrating its substantial presence in the market.
Notably, the company has maintained a consistent dividend growth, increasing its dividend for 20 consecutive years, which underscores its commitment to shareholder returns. Additionally, Texas Instruments' liquid assets surpass its short-term obligations, indicating a solid financial position for handling current liabilities.
InvestingPro Tips highlight that Texas Instruments is trading at a high earnings multiple, which aligns with Wolfe Research's observation of the company's rich valuation. Moreover, six analysts have revised their earnings upwards for the upcoming period, suggesting a potential upside in performance expectations.
For investors seeking further insights, there are 17 additional InvestingPro Tips available for Texas Instruments, including information on profitability and market trends, that can be accessed through the InvestingPro platform.
Considering Texas Instruments' strategic adjustments and Wolfe Research's outlook, these InvestingPro Insights can provide investors with a more comprehensive understanding of the company's financial health and market position.
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