Analysts Calculating Growth Potential at Texas Instruments

Texas Instruments

announced earnings of 48 cents per share in a surprising jump in value, causing shares to trade at 34.34 in after-hours trading--a jump of nearly 3.5% on the closing price of 33.19. The news marks a change in the stock's recent falling trend, as the company's EPS fell steadily throughout 2011 from 56 cents a share at the beginning of 2011 to 51 cents in Q3 2011. Revenues, which failed to rise throughout the year, fell again in the quarter by 3% compared to the previous year. The news comes after the company was recently downgraded by Needham & Company and Argus Research, who both have a "hold" rating on the company. More recently, Morgan Stanley rated the stock a "buy" despite the company's lowered guidance from management on the expectation that slowed demand would hit the company's bottom line. Analysts had previous expected Q4 earnings of 26 cents per share thanks in part to lower overall demand for semiconductors and analog electronics. However, analysts have also seen Texas Instruments enjoy a stronger market share thanks Texas Instruments has a few fundamental weaknesses that may make it an uneven performer in the coming year. The company's dependence on defence contracts expose it to falling military spending at a time when defense cuts are becoming a

amongst economists and politicians. The company's space and avionics research will also yield little return on investment when similar government cuts wash over several federal departments and agencies. While growing consumption of smartphone and portable devices have helped drive demand for Texas Instruments components, which appear in several devices sold globally, increased competition from this growing market will make it harder for the company to maintain its contracts with retailers in the long and short term. With companies such as Apple

and Samsung turning to joint-ventures for component production and development, demand for outsourced semiconductors may take a hit. Alternatively, the fear that smartphone and tablet markets are facing oversaturating are hitting confidence in semiconductor companies, even if this fear is premature. A new Pew report concluded that

owned a tablet or e-reader at the beginning of 2012. That number doesn't include smartphones, laptops, and desktops. With over one in four Americans having a tablet device, can market demand sustain the need for increased semiconductor production? Such fears may be short-lived and overblown, as the increased consumption of handhelds also points to consumers' greater dependence on these devices in their lives. The increasingly short lifecycle of handheld devices also points to greater need for semiconductors. If Texas Instruments can maintain its competitiveness both in terms of quality and price of its offerings, it should be a safe bet for the long term. This is why Texas Instruments has retained a positive reputation amongst analysts, the majority of whom have maintained an overweight or buy rating on the company despite a lowered outlook since management

a drop in demand for its products in December. While the news caused the stock price to fall below $30, January has yielded a strong recovery thanks to a string of new product announcements at CES. The company has a widespread presence, from consumer electronics to medical technology to defense infrastructure. Its diversification has been a source of strength for the company, and has made it a less volatile bet than AMD

, whose stock has fallen over 13% in the past year (TXN has fallen just over 2%). However, it has also underperformed compared to Intel

, which jumped over 28% in the past year while offering a higher dividend than its Texan competitor. Despite the lower upside on Texas Instruments, today's news confirms that it may remain a relatively solid bet for some time.