U.S. News

Analysts Upbeat on Texas Instruments, But Shares Sink


Wall Street analysts maintained largely positive views on Texas Instruments following the chip maker's quarterly update, with a number of analysts predicting an uptick in demand in the latter part of the year.

But shares of the world's largest mobile phone chipmaker tumbled  Tuesday as investors who had been looking for a brighter outlook were disappointed.

Texas Instruments provided an update for the fiscal first-quarter on Monday after the close of trading, tightening sales and earnings forecasts to the midpoint of previous forecasts.

"Our order trends are fully consistent with our view that this correction is winding down and, once again, growth should resume in the second quarter," said Ron Slaymaker, an investor relations executive for TI, on a conference call.

Merrill Lynch analyst Joe Osha said little new was provided by the company but raised the price target on the "buy"-rated stock to $38 from $35. "We think this is a great opportunity to buy an attractively valued stock at the bottom of the business cycle," he said in a research report Tuesday.

Osha also said he expects "significantly stronger than seasonal revenue growth" in the second and third quarters.

S&P Equity Research analyst Clyde Montevirgen maintained a "strong buy" rating on the stock.

"Although we are concerned about internal inventory, we believe that margins should improve from sales mix later in the year and think that Texas Instruments will be ready for possible sharp demand increases, given its large market share," the analyst said in a client note Tuesday.

TI forecast first-quarter earnings per share of 29 cents to 33 cents from continuing operations, compared with its January target of 28 cents to 34 cents.

The company also forecast revenue of $3.07 billion to $3.22 billion, compared with the previous $3.01 billion to $3.28 billion.

The midpoints of both earnings and revenue ranges matched those of TI's earlier forecasts as well as Wall Street expectations. Analysts estimated earnings of 31 cents a share on revenue of $3.15 billion, according to Thomson Financial.

Bear Stearns kept its "outperform" rating on TI shares, saying it expects wireless sales to bottom in the first quarter as pricing pressures ease later in the year.

"We remain buyers of Texas Instruments," said Bear Stearns analyst Gurinder Kalra.