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Renewal in Motion: Texas Instruments Stock Continues to Rise


Texas Instruments
Texas Instruments

Texas Instruments (TXN) is a leading American semiconductor company with a market cap of over $184 billion, making it bigger than Intel. 


The company does not specialize in making the fancy GPU and CPU that companies like AMD and Nvidia are known for. Instead, it specializes in making specialized chips that are used in industries like automotive, telecom, and other industrial purposes.


Some of Texas Instruments’ products are data converters, digital power monitors, and microwave solutions. 


The company has grown well in the past few years as its annual revenue has jumped from over $14.38 billion in 2019 to over $17.5 billion in 2023. Its net income has risen to over $6.5 billion. 


Texas Instruments revenues peaked at $20 billion in 2022 as the world went through a shortage of analog semiconductors. These shortages led to the company boosting its product prices and production.


Recently, however, this demand has slowed, leaving it with robust inventory levels. Its earnings statement shows that inventory rose from $2 billion in 2019 to over $4.1 billion in the last quarter. 


With its quarterly revenues falling, the management has embarked on a turnaround strategy that seeks to grow its sales, reduce inventories, and boost its free cash flow. The management will provide more details about this in its investor day event in August. 


Texas Instruments’ stock has risen by over 336% in the past decade and by 14% in the past 12 months. This performance happened because of its strong market share in the semiconductor industry and 20+ years of dividend growth.


Texas Instruments’ stock was trading at $201 on Monday as the HypeIndex hype jumped by 135%.


Texas Instruments Hype Index
Texas Instruments Hype Index


Positive hype


  • Texas Instrument published financial results that beat the Wall Street estimates. Its revenue came in at $3.8 billion, down from $4.35 billion it made in the same quarter in 2023. The decline was because of its industrial and automotive business.


  • The revenue figure was higher than estimates by $300,000. Its earnings per share of $1.22 was slightly better than the estimated $1.20. 


  • Texas Instrument’s forward guidance is that its third-quarter revenue will be between $3.94 billion and $4.26 billion. The average estimate among analysts is that its revenue will be $4.12 billion, a 10% drop from Q3’23. 


  • Therefore, the stock rose after earnings as investors predicted that the worst was now behind the company. 


  • At the same time, Elliot Management has taken a big stake in the company and asked for changes. The company has welcomed Elliot and said that it was open to working with it to boost shareholder returns.


  • Elliot Management has asked Texas Instrument to adopt a dynamic capacity-management strategy, align its expenditures to its revenue, and aim to generate a free cash flow target of $9 per share by 2026. 


  • The other positive about Texas Instrument is that it is a future dividend aristocrat as it grew its dividends for over 20 years. It has also reduced its outstanding share count from over 1 billion in 2016 to 912 million because of its share buybacks.



  • Analysts have raised their hopes about TXN, noting that there was light at the end of the tunnel. Morgan Stanley’s Joseph Moore noted that the stock had found a bottom and raised his target from $156 to $168, down from the current $201.


  • A Barclays analyst noted that its investor day in August will be important as it will lay its spending strategy and turnaround strategy.


Negative hype



  • Texas Instrument is highly overvalued for a company that is no longer growing. Its price-to-earnings ratio of 35 is higher than the S&P 500 index that is growing by almost 10%.


  • The company has a high dividend payout ratio at 90%. Some of the best dividend companies have a payout ratio of less than 50%.


  • While Texas Instruments has worked to reduce its inventories, management has hinted that it was still a challenge.


  • The semiconductor industry is highly cyclical and periods of boom are often followed by busts, meaning that the stock could still suffer a reversal in the long term.


Summary on Texas Instruments



Texas Instruments stock has done well this year even as the company faces substantial challenges in its industrial and automotive segment. 


In the near term, the growing HypeIndex figure means that the stock may continue rising as investors wait for its investor day event in August. In this event, the company will likely announce new measures to boost its revenue and free cash flows.



The main risk to be aware about is that its stock will retreat because of its higher valuation metrics. We have seen this happen among other semiconductor companies like AMD and Intel, which soared earlier this year and then moved into a deep bear market.



Also, this week will see companies like AMD, Intel, and Arm Holdings releasing their earnings. If their earnings are weak, they will likely drag other semiconductor companies downwards.


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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.


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