Texas Instruments (TXN) AI Stock Analysis

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Texas Instruments

(NASDAQ:TXN)

65Neutral

Texas Instruments' stock score reflects a solid financial position with strong profitability and cash flow, offset by revenue declines and high valuation concerns. The technical analysis indicates limited upward momentum, but the company's strategic initiatives and dividend policy provide support. Overall, the stock presents a moderate investment opportunity with long-term potential.

Positive Factors

Cost and Efficiency

Being nearly entirely front-end insourced offers cost and geo-dependability advantages for Texas Instruments.

Financial Performance

Texas Instruments is expected to deliver best-in-class free cash flow per share and dividend growth following the heavy investment cycle.

Manufacturing Control

By 2030, Texas Instruments expects over 95% of wafers to come from internal supply, which enhances control and efficiency.

Negative Factors

Competitive Position

TXN trades at a premium compared to its closest peer, which could generate significantly higher free cash flow margins.

Inventory Levels

Supply chain inventory levels remain at multi-year high, dismissing expectations of a quick recovery in analog.

Market Growth

Over the last decade, TXN’s Analog and Embedded segment sales grew below industry averages, resulting in notable share losses.

Texas Instruments (TXN) vs. S&P 500 (SPY)

Market Cap

$137.75B

Dividend Yield3.51%

Average Volume (3M)6.94M

Price to Earnings (P/E)29.1

Beta (1Y)1.27

Revenue Growth-10.72%

EPS Growth-26.60%

CountryUS

Employees34,000

SectorTechnology

Sector Strength40

IndustrySemiconductors

Share Statistics

EPS (TTM)5.20

Shares Outstanding909,917,850

10 Day Avg. Volume7,281,045

30 Day Avg. Volume6,939,779

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)10.42

Price to Cash Flow (P/CF)20.40

P/FCF Ratio44.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$208.91

Price Target Upside37.99% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering22

Texas Instruments Business Overview & Revenue Model

Company DescriptionTexas Instruments Incorporated (TXN) is a global semiconductor company that designs and manufactures a broad range of analog and embedded processing chips. Headquartered in Dallas, Texas, the company serves various sectors including industrial, automotive, personal electronics, communications equipment, and enterprise systems. Its core products include analog integrated circuits, embedded processors, and digital light processing (DLP) technology.

How the Company Makes MoneyTexas Instruments makes money primarily through the sale of its analog and embedded processing products. The company's revenue model is centered on designing and manufacturing semiconductor solutions that are integral to electronic systems and devices. Key revenue streams include analog chips, which account for a significant portion of sales due to their applications in power management, data conversion, and signal conditioning, and embedded processors, which are used in various control and processing tasks across different industries. Texas Instruments also benefits from long-standing relationships and partnerships with large-scale original equipment manufacturers (OEMs) and distributors who integrate its products into their devices and systems. Additionally, TI's focus on innovation and operational efficiency, along with its robust manufacturing capabilities, contribute to its profitability and competitive positioning in the semiconductor market.

Texas Instruments Financial Statement Overview

Summary

Texas Instruments presents a solid financial profile characterized by exceptional profitability margins and a stable balance sheet. While revenue has contracted, the company has sustained strong operational efficiencies and effective use of capital. Cash flow remains robust, although heavy capital expenditures are notable. Overall, Texas Instruments is in a strong financial position, though it should focus on reversing its revenue growth headwinds.

Income Statement

Positive

Texas Instruments' TTM (Trailing-Twelve-Months) shows a gross profit margin of 58.1% and a net profit margin of 30.68%, indicating strong profitability. However, the revenue growth rate is negative at -10.73% from the previous year, mainly due to cyclical downturns in the semiconductor industry. EBIT and EBITDA margins also reflect robust operational efficiency, standing at 34.14% and 44.72% respectively. Despite the drop in revenue, the company maintains healthy profitability metrics.

Balance Sheet

Positive

The company maintains a strong balance sheet with a debt-to-equity ratio of 0.80, reflecting manageable leverage. Return on Equity (ROE) is impressive at 28.38%, demonstrating effective use of shareholder funds. The equity ratio stands at 47.6%, indicating a balanced capital structure with a good proportion of assets financed by equity. Overall, Texas Instruments' balance sheet shows stability and effective financial management.

Cash Flow

Positive

Cash flow analysis reveals a positive but modest free cash flow growth rate of 11.06% in the TTM. The operating cash flow to net income ratio of 1.32 indicates strong cash generation relative to reported earnings. However, the free cash flow to net income ratio is lower at 0.31, suggesting significant capital expenditures. Cash flow stability remains sound, though high capital investments could be a point of consideration.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
15.64B	17.52B	20.03B	18.34B	14.46B
	Gross Profit
9.09B	11.02B	13.77B	12.38B	9.27B
	EBIT
5.46B	7.33B	10.14B	8.96B	5.89B
	EBITDA
7.54B	9.01B	11.22B	10.06B	7.20B
	Net Income Common Stockholders
4.80B	6.51B	8.75B	7.77B	5.59B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
7.58B	8.57B	9.07B	9.74B	6.57B
	Total Assets
35.51B	32.35B	27.21B	24.68B	19.35B
	Total Debt
13.60B	11.22B	8.73B	7.74B	6.80B
	Net Debt
10.40B	8.26B	5.68B	3.11B	3.69B
	Total Liabilities
18.61B	15.45B	12.63B	11.34B	10.16B
	Stockholders Equity
16.90B	16.90B	14.58B	13.33B	9.19B
Cash Flow		Free Cash Flow
1.50B	1.35B	5.92B	6.29B	5.49B
	Operating Cash Flow
6.32B	6.42B	8.72B	8.76B	6.14B
	Investing Cash Flow
-3.20B	-4.36B	-3.58B	-4.09B	-922.00M
	Financing Cash Flow
-2.88B	-2.14B	-6.72B	-3.14B	-4.55B

Texas Instruments Technical Analysis

Technical Analysis Sentiment

Negative

Last Price151.39

Price Trends

50DMA

183.98

Negative

100DMA

189.09

Negative

200DMA

193.63

Negative

Market Momentum

MACD

-2.34

Positive

RSI

42.88

Neutral

STOCH

26.19

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TXN, the sentiment is Negative. The current price of 151.39 is below the 20-day moving average (MA) of 177.65, below the 50-day MA of 183.98, and below the 200-day MA of 193.63, indicating a bearish trend. The MACD of -2.34 indicates Positive momentum. The RSI at 42.88 is Neutral, neither overbought nor oversold. The STOCH value of 26.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TXN.

Texas Instruments Risk Analysis

Texas Instruments disclosed 18 risk factors in its most recent earnings report. Texas Instruments reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Texas Instruments Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AMAT	76 Outperform	$103.14B	16.61	35.19%	1.26%	4.45%	-10.01%
QCOM	76 Outperform	$140.97B	13.62	41.96%	2.67%	12.13%	36.17%
MU	75 Outperform	$72.33B	15.56	10.10%	0.71%	71.05%	―
AMD	72 Outperform	$138.97B	85.49	2.89%	―	13.69%	91.75%
ADI	71 Outperform	$81.64B	52.49	4.43%	2.28%	-19.28%	-44.00%
TXN	65 Neutral	$137.75B	29.14	28.25%	3.51%	-10.72%	-26.60%
Sector *	57 Neutral	$18.54B	9.84	-14.38%	2.71%	5.07%	-23.65%

* Technology Sector Average

Performance Comparison

TXN

Texas Instruments

151.39

-13.46

-8.16%

AMD

Advanced Micro Devices

85.76

-84.14

-49.52%

ADI

Analog Devices

164.60

-28.88

-14.93%

AMAT

Applied Materials

126.95

-80.34

-38.76%

Micron

64.72

-57.66

-47.12%

QCOM

Qualcomm

127.46

-42.75

-25.12%

Texas Instruments Earnings Call Summary

Earnings Call Date: Jan 23, 2025 | % Change Since: -23.98% | Next Earnings Date: Apr 23, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with notable achievements such as the growth in Analog revenue and a strong cash position. However, significant challenges were evident in the form of revenue declines, especially in the Embedded Processing segment, and decreased gross profit margins. The company is navigating a competitive environment and economic uncertainties impacting key markets like automotive and industrial.

Highlights

Analog Revenue Growth

Analog revenue grew 2% year-over-year after 8 quarters of decline, signaling a positive turnaround in this segment.

Dividend Increase

Texas Instruments increased its dividend per share by 5% in the fourth quarter, marking the 21st consecutive year of dividend increases.

Strong Cash Position

The company's balance sheet remains strong with $7.6 billion of cash and short-term investments at the end of the fourth quarter.

CHIPS Act Funding

Awarded up to $1.6 billion in CHIPS Act funding to support new 300-millimeter wafer fabs, with expectations of $7.5 billion to $9.5 billion in total funding over the life of the program.

Lowlights

Revenue Decline

Overall revenue was $4 billion, a decrease of 3% sequentially and 2% from the same quarter a year ago.

Embedded Processing Decline

Embedded Processing revenue declined 18% year-over-year, showing significant weakness in this segment.

Gross Profit Margin Decrease

Gross profit margin decreased by 190 basis points due to lower revenue, higher depreciation, and reduced factory loadings.

Automotive and Industrial Declines

The automotive market was down mid-single digits, and the industrial market was down low single digits sequentially.

Increase in Inventory Levels

Inventory at the end of the quarter was $4.5 billion, up $231 million from the prior quarter, with inventory days increasing by 10 days sequentially.

Company Guidance

In the Texas Instruments (TXN) fourth quarter 2024 earnings call, executives provided a comprehensive overview of the company's financial performance and guidance for Q1 2025. The quarter saw a revenue of $4 billion, with a 3% sequential and 2% year-over-year decline. The analog segment experienced a 2% year-over-year growth after eight quarters of decline, while embedded processing declined by 18%. The industrial and automotive markets, comprising 70% of 2024 revenue, faced modest sequential declines. Gross profit amounted to $2.3 billion, representing 58% of revenue, but gross profit margin decreased by 190 basis points due to lower revenue, increased depreciation, and reduced factory loadings. Operating expenses were $937 million, up 4% year-over-year. The company returned $5.7 billion to shareholders over the past year and maintained a strong balance sheet with $7.6 billion in cash and short-term investments. Looking ahead, TXN expects Q1 2025 revenue to range between $3.74 billion and $4.06 billion, with earnings per share between $0.94 and $1.16, and an effective tax rate of about 12% for the year. The company remains focused on enhancing its competitive advantages, including manufacturing and technology, to drive long-term free cash flow per share growth.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.