Stock Brawl: Texas Instruments
Texas Instruments is the stock up for debate in today’s Stock Brawl on “Closing Bell” at 3:40PM ET.
With a market cap of $34.6B, Texas Instruments is a high-volume stock at the NYSE and a leading manufacturer of wireless semiconductors.
The stock has gained nearly 20% in the past two months and TXN is set to report third-quarter results after the bell today.
Our bull, Patrick Wang, says the stock is looking good, while our bear, Dean Berenbaum, says you shouldn’t count on semiconductors this season.
Making Their Case: The Bull
Patrick Wang, Managing Director, Wedbush Securities
Wedbush Securities gives TXN an 'outperform' rating with a $34 price target. Wedbush expects TXN to gain market share despite potential “choppiness” over the next few quarters.
Wang has this to say:
1. “Expect in-line 3Q results.” Wang believes that TXN’s stable growth patterns persisted throughout the quarter.
2. “Expect lower 4Q guide.” There may be a slowdown for industrials and communications, but Wang “sees risk to 4Q as declining orders will only be partially mitigated by share gains." Wang leaving revenue / EPS estimates unchanged at $3.50bn / $0.64.
3. “Lead times continue to improve.” “TI continues to reduce lead times in an orderly manner with our checks indicating current average lead times of 11w, down from 12w at time of MidQ update. Lower lead times have not resulted in abnormal cancellations.”
Making Their Case: The Bear
Dan Berenbaum, Managing Director, Auriga USA LLC.
Auriga USA has a 'sell' rating on Texas Instruments. While the firm does not expect many surprises from the upcoming third quarter earnings, it sees no reason to move off of its $22 price target on TXN.
Berenbaum makes the following points:
1. “Investors may also be underestimating TXN’s willingness to sacrifice margins for market share.” There could potentially be a reverse leverage if ASPs decline.
2. “Communications equipment and industrial channels are starting to slow.” The demand-pull for these products are decelerating. An uncertainty like this will probably keep buyers away from these stocks.
3. “We still see downside to cross-cycle ‘fair value.’” Although some bulls may argue that semiconductors appear inexpensive based on current estimates, Berenbaum thinks that this is just a normal contraction on peak earnings.
Crystal Lau contributed to this article