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Investing.com -- Texas Instruments was upgraded to Market-Perform from Underperform by Bernstein, which said signs of a cyclical recovery are emerging.
The chipmaker’s shares have underperformed significantly since September 2023, trailing the broader semiconductor index and the S&P 500.
However, despite deep cuts to earnings estimates, the stock has held up better than expected, analysts at Bernstein said.
Bernstein had previously a bearish view on the stock, with downgrading it on concerns around falling gross margins due to Texas Instruments’ aggressive investment cycle.
Consensus margin estimates for 2024 dropped about 7%, and 2025 projections trending even lower.
Now, the brokeage sees that risk as largely reflected in the stock.
With capital spending expected to decline, free cash flow per share could begin to improve, Bernstein wrote. It also sees a potential for upward revisions to third-quarter earnings estimates, which currently look conservative.
While Texas Instruments (NASDAQ:TXN) has lost market share in both analog and embedded processing in recent years, Bernstein said recent trends suggest some stabilization, or even slight improvement, in share.
Though the stock trading at around 35 times forward earnings, is at a steep premium to peers and the broader market.
Bernstein said it doesn’t see much room for upside but believes downside risks have eased, particularly if the cycle turns more favorable.
The firm raised its price target to $180 from $140, lifting its earnings multiple assumption but keeping its EPS forecast unchanged.