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A 'More Extended Correction' Ahead? Texas Instruments Analysts React To Q3 Report

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A 'More Extended Correction' Ahead? Texas Instruments Analysts React To Q3 Report

Texas Instruments Incorporated (NASDAQ: TXN) reported in-line results Tuesday for the September quarter while guiding to significantly weaker revenue for the December quarter. Analysts are in wait-and-watch mode.

In-Line Quarter, But Nothing To Write Home About

Texas Instruments reported third-quarter revenue, earnings per share and gross margin of $3.8 billion, $1.49 and 64.9%, respectively, broadly in-line with consensus expectations.

Although the September quarter results were in-line, the company saw weakness across all 28 segments, with a year-on-year decline in all major customers, regions and end markets, Mizuho Securities analyst Vijay Rakesh said in a Tuesday note. 

While all markets declined, the worst performance was in automobile, industrial and communication infrastructure, the analyst said.

The analyst expects seasonality to exert pressure on the stock in the near-term, and for the stock to bottom into the first half of next year, with easier 2020 comparisons.

Mizuho maintained a Neutral rating on Texas Instruments and lowered the price target from $116 to $113.

Related Link: Xilinx's Revenue Forecast Below Wall Street Estimates; Blames Trade War

Guidance Is Difficult To Digest

Texas Instruments guided to revenue of $3.2 billion and earnings of $1 per share for the December quarter, representing a 15% sequential decline.

“We had previewed weakness, but were surprised at the magnitude," Morgan Stanley analyst Joseph Moore said in a Wednesday note. 

The company correlated the revenue weakness with normal downturns that take four to five quarters to bounce back from, the analyst said.

Yet the duration of the current cycle could be longer, with a continued downturns in the first two quarters of 2020, he said.

Year-on-year growth is unlikely until the third quarter at the earliest, Moore said. 

Morgan Stanley reiterated an Equal-weight rating on Texas Instruments and cut the price target from $110 to $109. 

Woes To Continue

The December quarter will be the fifth consecutive quarter of contraction, and Texas Instruments is likely to see a “more extended correction,” KeyBanc Capital Markets analyst John Vinh said in a Tuesday note. 

While maintaining a Sector Weight rating, the analyst said broader demand seems to have bottomed.

The guidance is likely impacted by Texas Instruments’ share loss in 5G and to other non-US suppliers due to China's insourcing strategy as well as its channel consolidation strategy, he said. 

Price Action

Texas Instruments shares were down 1.02% at $117.74 at the time of publication. 

Related Link: 5 Stocks Moving In Tuesday's After-Hours Session

Photo by Texas Instruments via Wikimedia

Latest Ratings for TXN

DateFirmActionFromTo
Feb 2021Raymond JamesUpgradesMarket PerformOutperform
Jan 2021Deutsche BankMaintainsHold
Jan 2021MizuhoMaintainsNeutral

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