Evercore ISI updated its outlook on Texas Instruments (NASDAQ:TXN) on Wednesday, raising its price target to $255 from the previous $225 while maintaining an outperform rating on the stock. The company’s increased confidence in Texas Instruments comes after early signs that it believes earnings will rebound sharply over the next two to three quarters.
The company’s analysis shows that Texas Instruments is currently shipping 27% below consumption as supply chain inventories are depleted. This is expected to change once the inventory correction phase is over, with China’s significant revenue growth of 20% sequentially seen as a harbinger of global trends. The company’s 2025 earnings per share (EPS) forecast is $8.62, which is 36% higher than market expectations.
Evercore ISI highlights three momentum indicators supporting a Buy rating on Texas Instruments. First, it expects annual revenue growth to increase from a 16% decline in the second quarter of 2024 to as much as 35% over the next four quarters.
Second, the days on inventory (DOI) metric peaked in the first quarter of 2024 and is expected to continue declining, thereby increasing visibility. Finally, the company forecasts free cash flow per share (FCF/Shr) to bottom out at $1 in the first quarter of 2024, double to $2 by the end of 2024, and increase to $14 over the next four years. Dollar.
The company also noted that Texas Instruments’ gross margins are structurally higher, with gross margin declines of 75-85% before higher depreciation charges, an improvement from the previous model of 70-75%. This is attributed to a greater mix of 300mm wafers and the shift of external foundry wafers to in-house manufacturing facilities.
Additionally, Texas Instruments (TI) has confirmed share gains in the automotive sector, particularly in radar and in-vehicle connectivity solutions. This is consistent with proprietary pipeline inspections conducted by Evercore ISI in June.
The firm ended up backing Texas Instruments as its top pick, emphasizing the company’s potential to be the best free cash flow per share growth story in the semiconductor industry.
In other recent news, Texas Instruments (NASDAQ: TI ) reported a mix of challenges and growth during its latest earnings call. The company reported second-quarter revenue of $3.8 billion, up 4% quarter-to-quarter but down 16% compared with the same period last year.
Despite declines in analog and embedded processing, TI expects revenue in the next quarter to be between $3.94 billion and $4.26 billion, with earnings per share expected to be $1.24 to $1.48.
These forecasts are supported by China’s continued growth and the strong performance of the personal electronics industry. Additionally, TI announced plans to invest in capacity, particularly in the industrial and automotive markets. The company grew in personal electronics and communications devices despite year-over-year declines in some markets.
These recent developments point to a cautious but optimistic outlook for Texas Instruments (TI), with a focus on strategic investments and growth in key markets.
Future expectations include overall revenue growth of 7% in the third quarter and strong performance of the personal electronics industry in the third quarter. The company’s China business grew about 20% in the second quarter from the previous quarter and also showed signs of recovery.
This article was generated with the support of artificial intelligence and reviewed by an editor. For more information, please see our terms and conditions.
