Texas Instruments (TXN) Stock Falls on Mixed Q3 Results, Analysts Mostly Neutral Amid High Valuation and Supply Chain Constraints
Shares of Texas Instruments (NASDAQ: TXN) are down 4% in pre-open Wednesday after the company reported its third-quarter results.
Texas Instruments reported Q3 EPS of $2.07, which is slightly better than the analyst estimate of $2.05. Revenue for the quarter came in at $4.64 billion versus the consensus estimate of $4.66 billion.
"Our cash flow from operations of $8.5 billion for the trailing 12 months again underscored the strength of our business model. Free cash flow for the same period was $7.1 billion and 41% of revenue. This reflects the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter production,” said Rich Templeton, TI's chairman, president and CEO.
Texas Instruments projects Q4 EPS of between $1.87 and $2.07, with the midpoint coming in ahead of the $1.93 consensus. The company is calling for Q4 revenue in the region of $4.22 billion to $4.58 billion, with the midpoint lower than the consensus of $4.44 billion.
Stifel analyst Tore Svanberg reiterated a Hold rating and a $200.00 per share price target on the TXN stock, citing high valuation. Similarly, Mizuho analyst Vijay Rakesh maintained a Neutral rating and a $185.00 per share price target.
“We believe continued supply chain constraints limit upside, with potential whiplash from inventory build and/or pockets of over-ordering, despite strong execution from TXN with industry-leading GMs and capital return,” Rakesh wrote in a client note.
Rosenblatt analyst Hans Mosesmann is more bullish as he reiterated a Buy rating and a $230.00 per share price target. The analyst blames “continued supply constraints and a different focus in customer behavior” for a lower-than-expected Q4 outlook.
“The most interesting element of the TI call was an emerging and broad based customer behavior to selectively focus on critical components in their BOM, and not the entire BOM as we have seen in previous cycles. The behavior is consistent with Micron's view of what is happening in the notebook space where shortages of power management ICs (for example), is pausing in the short term the expedites of other components. We see this new customer behavior as disciplined and rational and as such diminishing the prospects of traditional over or double ordering; a key element of risk in any semiconductor up cycle. The dynamic also limits potential over building of capacity generally. We believe the continued emphasis on Industrial & Automotive, more balanced analog/ embedded growth vectors, and strong excess cash return set up TI well in 2022,” the analyst said in a client note.
Shares closed at $196.98 yesterday.