Bernstein Continues To Find Itself Chasing Texas Instruments

Texas Instruments Incorporated TXN reported its 2Q16 results with the revenue and EPS beating the consensus expectations.

Bernstein’s Stacy A. Rasgon maintains a Market Perform rating on the company, while raising the price target from $60 to $70.

Beat Results And Guidance

Rasgon mentioned that the revenue upside drove the EPS beat, as did the very strong gross margins, were offset by higher than anticipated opex.

“The company saw continued strength in automotive, and continued recovery in industrial and communications equipment; personal electronics rose QoQ but remained down significantly YoY,” the analyst stated.

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Texas Instruments also issued robust guidance, with the revenue, EPS and implied gross margins well ahead of the consensus.

However, the opex guidance was high once again.

Chasing The Stock

“In fact, the company appears to be re-investing some of their operational upside in the business, and suggested to us that R&D may grow for the next year or two,” Rasgon said.

While this limits the EPS upside, Rasgon noted one of the main controversies surrounding the stock has been whether Texas Instruments is spending enough on R&D, as compared to the competition.

Therefore, the analyst believes increasing core spending on the business might not be the wrong thing to do.

“We very much like the company and how it is run, but unfortunately continue to find ourselves chasing the stock,” Rasgon added.

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