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Texas Instruments Falls on Soft Profit Forecast and Chip Demand Concerns

Texas Instruments falls after revealing muted profit guidance, raising concern that demand driven by the global semiconductor shortage is unsustainable.

Texas Instruments  (TXN) - Get Report shares fell on Thursday after the chipmaker revealed muted current-quarter profit guidance, raising concerns that the current level of demand driven by the ongoing semiconductor shortage is unsustainable.

Dallas-based Texas Instruments on Wednesday reported second-quarter earnings of $2.05 a share compared to analysts' estimates of $1.83. Revenue came in at $4.58 billion, also above estimates.

The company said it expects third-quarter revenue to range between $4.4 billion and $4.76 billion with earnings expected to be between $1.87 a share and $2.13 a share. Analysts polled by FactSet had expected revenue of $4.59 billion with earnings of $1.97 a share.

Barclays analyst Blayne Curtis wrote in a post-earnings research note that the “flat outlook leaves little to live for this late in the cycle,” adding that despite Texas Instruments being a “well-run company” it will not be enough to “offset a cyclical correction.” 

He maintained his underweight rating on the stock and held his one-year price target of $170.

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Evercore analyst C.J. Muse had a more upbeat assessment, noting that disappointing revenue expectations are “nonsensical” and “likely conservative,” particularly when considering previous top-line beats. Muse has an in-line rating and a $200 price target.

KeyBanc analyst John Vinh also had a less negative take, saying Texas Instruments’ current outlook may “prove conservative.” Vinh and his team expect to see short-term “share gains and design wins,” which they see adding to elevated longer-term growth. 

The group has an overweight rating on the stock and a price target of $240.

Shares of Texas Instruments were down 5.03% at $184.46 at last check. The stock ended the trading day Wednesday up 3.45%. Year to date it is up 19.74%.

Separately, General Motors  (GM) - Get Report announced Wednesday that it will halt most U.S. and Mexican production of its profitable full-size pickup trucks next week due to the ongoing global shortage of semiconductor chips.

The production cuts are slated for plants in Michigan, Indiana and Mexico that produce the Chevrolet Silverado and GMC Sierra pickups.

Read more about the chip sector, the chip shortage and more of Cramer's investing ideas and insights over on Real Money.