KeyBanc raised its price target on Texas Instruments to $240.00 from $220.00 and maintained an Overweight rating on the semiconductor manufacturer. The shares were trading at $207.03, approaching a 52-week high of $221.69. Data from InvestingPro indicates the shares appear overvalued relative to its Fair Value calculation.
The change in KeyBanc's outlook followed Texas Instruments' results for the December quarter, which came in line with expectations, and guidance for the March quarter that was higher than analysts had forecast. KeyBanc attributed the stronger guidance in part to demand from data centers as well as persistent strength across the industrial end market.
For the trailing twelve months the company reported revenue of $17.68 billion, representing year-over-year growth of 13.05%. Within the company's segment reporting, industrial revenue increased 18% year-over-year in the fourth quarter. KeyBanc noted that the industrial business still has significant upside potential, observing it remains roughly 25% below its prior peak levels.
InvestingPro data also reflects Texas Instruments' solid profitability metrics, indicating a 30% return on equity. Management described the broader cyclical recovery as "slow," while reporting that bookings and turns rose steadily through the quarter.
The company reported December quarter revenue of $4.4 billion, consistent with consensus expectations. It provided March-quarter guidance set at $4.5 billion, a level that marginally exceeded analyst projections.
Geographically, the firm reported continued strength in China, where sales grew 16% year-over-year in the fourth quarter. Management expects China sales to decline seasonally in the first quarter. The company also acknowledged concerns about softness in the automotive market even as bookings and other indicators improved.
KeyBanc said it was encouraged by the results and guidance, prompting the firm to raise its estimates in addition to the price-target increase.
Analyst response
Following the earnings announcement, several brokerages updated their targets for Texas Instruments. UBS increased its price target to $260, pointing to improving revenue trends and constructive commentary on bookings and backlog. Benchmark raised its target to $250, highlighting the companys strong guidance for the upcoming quarter.
Cantor Fitzgerald moved its target to $225, citing surprisingly positive quarterly results and better-than-expected gross margin trends. Baird also lifted its target to $225, calling the companys above-seasonal outlook a positive surprise. In contrast, Mizuho set a lower target of $160 while maintaining an Underperform rating despite the companys guidance exceeding expectations.
What this means
The cluster of target changes reflects a spectrum of analyst views on Texas Instruments' near-term trajectory and valuation. Several firms raised targets based on improving revenue patterns, bookings commentary and above-seasonal guidance, while at least one firm continues to express caution even after the company's guidance outpaced expectations.
Summary
KeyBanc's decision to lift the price target to $240 and keep an Overweight stance follows in-line December-quarter results, higher March-quarter guidance, and continued industrial strength. The company reported $17.68 billion in trailing-twelve-month revenue with 13.05% year-over-year growth, an 18% industrial segment increase in the fourth quarter, and a 30% return on equity. Multiple brokerages updated their targets after the earnings release, producing a range of valuations and opinions.
Key points
- KeyBanc raised its price target on TXN to $240 from $220 and retained an Overweight rating.
- Texas Instruments reported December-quarter revenue of $4.4 billion and guided to $4.5 billion for the March quarter, slightly above analyst expectations.
- Industrial revenue grew 18% year-over-year in the fourth quarter, while China sales rose 16% year-over-year; the industrial segment remains about 25% below prior peak levels, per KeyBanc.
Risks and uncertainties
- Valuation: InvestingPro indicates the stock appears overvalued relative to its calculated Fair Value, presenting a valuation risk for investors.
- Market cyclicality: Management described the recovery as "slow," and the company flagged potential softness in the automotive market, posing demand risk to relevant end markets.
- Geographic seasonality: China sales are expected to decline seasonally in the first quarter, which may pressure near-term revenue growth.
The companys combination of steady bookings, above-seasonal guidance and divergent analyst reactions underscores both momentum and differing views on valuation and risk.