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Investing.com -- Wolfe Research upgraded Texas Instruments (NASDAQ:TXN) to Outperform from Peer Perform on Monday, saying the chipmaker is nearing the end of a heavy investment cycle that had weighed on margins and free cash flow.
Brokerage has set a $230 price target and said it expects free cash flow to rise meaningfully starting in 2027, supported by both lower capital spending and improving demand across analog semiconductors.
Texas Instruments has underperformed the broader market and semiconductor peers since 2022, when it began a multi-year ramp-up in manufacturing investments.
Wolfe said that phase now appears to be winding down, creating room for stronger financial returns.
The analysts at Wolfe noted that macroeconomic uncertainty are there adding that near-term earnings estimates may still be too high, but believes investors will begin to look past 2026 and focus on the company’s 2027 earnings potential.
“We believe the industry is on the cusp of a cyclical recovery in analog, with TXN well-positioned to benefit,” Wolfe analysts said.
Wolfe expects earnings per share to reach about $8 in 2027, up from an estimated $5.70 in 2024, driven by roughly 10% annual revenue growth and operating leverage.
On that basis, the stock trades at roughly 24 times earnings, with an upside scenario that could bring EPS to $9.50.
It also noted that the stock looks more attractive when valued on expected cash flow, estimating $9.5 billion in free cash flow for 2027, implying a valuation multiple well below the company’s historical average.