Texas Instruments rises after solid Q3 as analysts remain largely positive

Texas Instruments’ (NASDAQ:TXN) stock rose about 3% premarket on Wednesday following a third quarter beat, but weak guidance, as Wall Street analysts had largely positive views on the stock.

Summit upgraded Texas’ rating to Buy noting that it expects the company to outperform its analog peers in 2025.

The analysts anticipate earnings outperformance in 2025 as cyclical demand recovery gains momentum.

Consistent with Summit’s industry checks, Texas is seeing a cyclical recovery in the PC, smartphone, consumer, enterprise systems, and communications infrastructure end markets, according to the analysts.

While global industrial and automotive end-markets remained mixed, Texas is seeing gains in the China electric vehicle, or EV, market. The analysts believe the automotive strength is due to the higher EV content coupled with some original equipment manufacturers, or OEMs’, concern about possible export restrictions.

The analysts think the cyclical demand recovery in the non-industrial market can drive earnings outperformance in 2025.

In addition, the analysts believe that Texas’ 300mm fabs offers upside to gross margin and operating margins when demand recovery gains momentum.

Meanwhile, Morgan Stanley kept its Underweight rating on the shares and raised the price target on the stock to $167 from $154.

Analysts led by Joseph Moore said that the consensus estimates carried a better-than-seasonal snapback which the buy side was already discounting. Industrial remains surprisingly weak, while automotive remains surprisingly durable and the analysts expect both to reverse from here.

The third quarter revenue came in slightly better than Morgan Stanley/Street estimates, mainly led by a 20% sequential increase in China automotive (overall automotive up 7% to 8%).

The company spoke of China automotive revenue being at an all-time high led by EV momentum and content growth. While the overall business is still searching for the bottom, Texas’ view is for peak to trough to be lower than industrial, the analysts added.

The analysts noted that industrial should start to see a meaningful rebound, barring economic dislocation. The analysts noted that they continue to be surprised at the persistent weakness in industrial.

Moore and his team added that fourth quarter revenue guidance of $3.70B to $4B ($3.85B at midpoint) was below Morgan Stanley’s estimate of $3.986B and Street estimates of $4.07B. EPS was guided to $1.18 which was below the Street forecast of $1.35 and Morgan Stanley’s estimate of $1.29.

TD Cowen kept a Hold rating and $200 price target on the shares.

The analysts said that the third-quarter results were better than feared as Auto surprisingly grew from strength in China and non-Industrial segments recovered, driving higher gross margin in

The analysts said that the third-quarter was better than feared as Auto surprisingly grew from strength in China and non-Industrial segments recovered, driving higher gross margin in the quarter.

However, with the fourth quarter/first quarter seasonally weaker quarters and only stable results in Industrial, the analysts think downward pressure on revenue/gross margin will drive Street numbers lower. The rich valuation keeps the analysts sidelined for now.

Benchmark reiterated its Buy rating and its $230 price target on the stock.

The analysts believe Texas’ elevated internal inventory should allow it to aggressively compete for sockets it was forced to pass on during the period of COVID-related supply constraints, which should continue the momentum it is currently enjoying in its non-Auto and Industrial businesses, while also allowing the company to flex its supply and capacity strengths as its broader core markets begin to see shipments return to consumption levels next year.

Related Stocks: Shares of Qualcomm (QCOM) -4%, Analog Devices (ADI) +1%, Advanced Micro Devices (AMD) -1%, Micron Technology (MU) and Marvell Technology (MRVL) were largely flat premarket on Wednesday.