In a report published Monday, UBS analyst Stephen Chin upgraded the rating on Texas Instruments Incorporated (NASDAQ: TXN) from Neutral to Buy, while maintaining the price target at $55. The analyst expects the company to report its Q2 results above the consensus forecasts.
The analyst believes that the Q2 upside would come as a surprise for investors, following the 16 percent decline in the stock since April, driven by the various negative preannouncements by Texas Instruments regarding its PC/enterprise supply chain.
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Investors appear to be "bracing for more bad news, given the recent semi pullback, despite traditional indicators such as global PMI and auto shipments suggesting stable to improving demand," Chin said.
PMI data for Europe and the U.S. improved in June, as compared to May, although China remained mixed. According to the UBS Ecosystem Model, there is a 96 percent likelihood of the Q2 revenue beating the consensus. The Q2 revenue and EPS estimates have therefore been raised.
According to the UBS report, "Q3 outlook could also have upside but PC softness could temper magnitude." The UBS proprietary model indicates an 85 percent chance of the Q3 guidance coming in above the consensus. The Q3 revenue estimate has accordingly been raised.
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