UPDATE: Credit Suisse Reiterates Neutral Rating, Raises PT on Texas Instruments
In a report published Wednesday, Credit Suisse Group reiterated its Neutral rating on Texas Instruments (NASDAQ: TXN), and raised its price target from $26.00 to $32.00.
Credit Suisse noted, “Investors will likely give TXN a free pass on the lack of leverage as the cycle is bottoming, but TXN's significant amount of excess capacity and an evolving business model make operating leverage highly dependent on revenue growth which is not consistent with our expectation for a lackluster industry recovery. Specifically, in C1Q we are confused why GM is likely to decline 150bps q/q despite (1) under-utilization charges which are expected to be flat to down q/q and (2) a richer mix of Analog/Embedded - the margin profile looks more commodity Analog than high performance. Long-term, we are concerned that a 5-year ‘normal' seasonal pattern for Core TXN produces a negative CAGR and is certainly not consistent with excessive growth - even assuming sequential growth rates 100bps ABOVE seasonal and incremental GM of 75% implies that TXN will not hit 55% GM until 2020.”
Texas Instruments closed on Tuesday at $33.46.
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