KeyBanc Expects Texas Instruments To Outperform, 'Well-positioned To Service Upside Demand'

Given its higher internal capacity, Texas Instruments Incorporated TXN is well-positioned to service near-term upside demand in a “supply constrained environment,” according to KeyBanc Capital Markets.

The Texas Instruments Analyst: John Vinh upgraded the rating for Texas Instruments to Overweight, while keeping the price target unchanged at $225.

The Texas Instruments Thesis: There are several aspects about the company’s business that seems underappreciated, Vinh said in the upgrade note.

The fact that 80% of Texas Instruments’ manufacturing capacity is internal should continue to drive “incremental design wins and share gains,” he noted.

“It’s the decision to not increase pricing and capacity is driving incremental share gains that should lead to outperformance over the next several years,” the analyst wrote.

Inputs from supply chain partners indicate that “much of the company’s demand creation in NA and Europe is generated through its web resource TI.com,” Vinh said.

“As such with a unique asset as TI.com and its direct consignment strategy, we believe this will allow TXN to sustain higher operating margins over time. Additionally, with its greater scale, and profitability, we believe TXN will also be able to sustain higher levels of R&D investments, which in turn should drive continued share gains,” he further wrote.

“Consolidated distribution strategy and direct customer visibility via its consignment strategy provides greater visibility and sets the stage for a softer cyclical landing as it lessens the risk of double ordering,” the analyst stated.

TXN Price Action: Shares of Texas Instruments are down 0.33% at $185.56 early Tuesday afternoon. 

(Photo: Texas Instruments)