Texas Instruments stock has seen a modest rise of 7% year-to-date, falling behind the broader Nasdaq-100 index. The semiconductor industry has been recovering, led by demand for AI chips and personal computing, but Texas Instruments has faced challenges as major customers reduce purchases. In Q1, sales dropped 16% to $3.66 billion, with weaker sales of analog semiconductors and embedded products. Automotive customers have been working through inventory levels, while industrial and communication equipment sectors have also scaled back on purchases, leading to margin pressure.
Over the past three years, TXN stock has seen little change, lagging behind the S&P 500 index. Returns for TXN were 15% in 2021, -12% in 2022, and 3% in 2023, compared to 27%, -19%, and 24% for the S&P 500, respectively. Beating the S&P 500 consistently has been a challenge for individual stocks in recent years. In contrast, the Trefis High Quality Portfolio outperformed the S&P 500 each year over the same period, providing better returns with less risk. With the current macroeconomic uncertainty, could TXN underperform the S&P in the next 12 months or see a strong jump in performance?
For the second quarter, Texas Instruments expects to earn between $1.05 and $1.25 per share, with sales between $3.65 billion and $3.95 billion, marking a decline of about 10% year-over-year. Despite this, there are positives for the company, such as expected steady semiconductor content growth in industrial sectors and strong growth in the automotive sector. The company has invested in expanding its wafer fabrication capacity in the U.S. to reduce geopolitical risks and improve efficiency and competitiveness. Texas Instruments stock trades at about 45x forward earnings, slightly high in the view of analysts, with a valuation of about $175 per share, slightly below the current market price of $182.
The Trefis High-Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the past three years, providing better returns with less risk. The current uncertain macroeconomic environment, with high oil prices and elevated interest rates, could impact TXN’s performance in the next 12 months. Texas Instruments’ revenue mainly comes from industrial and automotive sectors, which have been growing steadily, accounting for 75% of revenue in 2023. The company’s investments in expanding its wafer fabrication capacity in the U.S. could mitigate geopolitical risks and improve long-term competitiveness.
Overall, Texas Instruments stock has been facing headwinds in the semiconductor industry, with a decline in sales and margins pressure. Despite expectations for a decline in earnings and sales in the second quarter, the company has potential for growth in the industrial and automotive sectors. The company’s investments in expanding its wafer fabrication capacity in the U.S. could also enhance its long-term competitiveness. Analysts value Texas Instruments at about $175 per share, slightly below the current market price of $182.
