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Texas Instruments (NASDAQ:TXNWall Street is confident that the downturn in the analog sector of the semiconductor industry is over after Intel Corp. released second-quarter results and guidance.
share Increased by 1.6% in premarket trading on Wednesday.
“As we highlighted last quarter, we “Analog has hit the bottom in both TXN and industrial,” Morgan Stanley analyst Joseph Moore wrote in a note to investors. “TI expects 7% growth in Q3, assuming normal seasonality for the second consecutive quarter – at least what was normal pre-COVID. Automotive and industrial declined sequentially in Q2, and while the contribution of the end market in Q3 is unclear, the company highlighted that there is still excess inventory in parts of the automotive and industrial markets.”
Moore raised his price target on Texas Instruments to $168 from $156 but maintained his underweight rating on the stock.
In addition, Texas Instruments will hold a capital markets presentation on Aug. 20, at which the company is expected to lay out spending plans under a “range of scenarios,” which Barclays analyst Tom O’Malley said should ease some investor concerns.
“We don’t anticipate any unexpected cuts, but [near-term] “While capex targets have been met, we believe management has indicated it has room in its multiyear plan, which alone should ease some of the concerns expressed by the investment community,” O’Malley wrote in a note to investors.
O’Malley rates Texas Instruments as equal weight and raised his price target to $210 from $190.
Others, including KeyBanc analyst John Vinh, agreed that Texas Instruments’ results reflect an improvement.
Vinh said the results indicate a recovery in the Chinese market, which grew 20% sequentially. Management further noted that some subsegments are beginning to recover and that the industrial sector is nearing bottoming out. Vinh raised his price target to $250 from $200 and maintained his Overweight rating on the stock.
Benchmark analyst Cody Ackley also noted that the results provided some relief to investors after NXP Semiconductors’ (NXPI) results earlier this week raised concerns.
“Benchmark believes the market has become particularly pessimistic following the disappointing earnings and guidance issued by TI peer NXPI on Monday. NXP is highly dependent on its automotive division and has low leverage in its industrial division. NXP notes lingering inventory issues in its industrial and automotive divisions but is more optimistic about the outlook for its automotive division,” Ackley wrote in a note to investors. He reiterated his buy recommendation on the stock and his $230 price target.
Looking ahead, Texas Instruments now expects third-quarter revenue of $3.94 billion to $4.26 billion and earnings per share of $1.24 to $1.48.
Analysts had expected earnings of $1.38 per share on revenue of $4.12 billion.
