Texas Instruments Incorporated (NASDAQ: TXN)
Texas Instruments Incorporated is an American technological business with its main office in Dallas, Texas. It creates and produces integrated circuits and semiconductors, which it then sells to producers and designers of electronics around the world. With their positive outlook and recent commitments to the near future, the company has seen an increase in mentions by 143% over the last day, prompting investors to wonder what makes the stock gain such hype. Currently, the share price of Texas Instruments Incorporated is $173.20 per share.
Positive Hype
There are lots of reasons Texas Instruments has gained much hype over the last few days, here are some of the positive reasons why.
It's the world's leading analogue chip supplier, with approximately 19% of the market in 2021. That translates to revenue totalling just over $20 billion over the past four quarters.
Additionally, Texas Instruments is very profitable; about $0.29 of every revenue dollar ends up as free cash flow.
The company's strong margins have made Texas Instruments an excellent dividend stock; investors can get a 2.8% dividend yield today, and management has increased the payout for 19 consecutive years.
The dividend payout ratio is 47%, which leaves plenty of room for growth for this (potential) eventual Dividend Aristocrat.
The company has been a consistent purchaser of its own stock, reducing shares outstanding by 46% from between 2004 and 2021.
TI expects opportunities will translate to growth for Texas Instruments; analysts are looking for EPS growth averaging 9% annually over the next three to five years.
Semiconductors are the building blocks of technology, so chips should remain in demand as new technology like autonomous vehicles, the Internet of Things (IoT), and automation continue growing over the coming years.
Negative Hype
No investment is free of risk, and Texas Instruments is not exempt from this idea. Here are some possible risks that come with investing in the company now.
In 2023, investors should be watching if customer demand wanes for TI. Even though its end markets are poised to grow over the long haul, the semiconductor market has gone through wild swings since the start of the COVID-19 pandemic.
Over the long term, TI will need to manage a CEO transition. Long-time CEO Rich Templeton just announced his resignation from the company, elevating president and 24-year company veteran Haviv Ilan to the position.
Conclusion
Overall, TI is a great business with multiple industry tailwinds and consistently returns cash to shareholders. These ingredients are needed for generating strong shareholder returns, which makes TI one of the most fabourable stocks to own in the near future. The stock held up well in 2022, down just 14% from its high. But at a price-to-earnings ratio (P/E) of 18, the stock is still cheap compared to its median P/E over the last decade of 21.
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