Texas Instruments (TXN) - Get Reportmissed revenue expectations and issued light guidance as the chipmaker said the trade war between the U.S. and China had started to take a toll on its business. Analysts were quick to lower their price targets on the stock.
The stock was falling 7.79% to $118.55 a share Wednesday. The company said revenue fell 11.75% to $3.77 billion in the third quarter, missing Wall Street's expectation of $3.82 billion. Earnings per share fell to $1.49, beating analysts estimate of $1.42.
The company guided for fourth quarter revenue of between $3.07 billion and $3.33 billion, below analysts estimate of $3.59 billion.
Here's what analysts are saying now.
Alliance Bernstein, Market Perform, Price Target Reduced From $125 to $110
"The magnitude of the Q4 miss is likely going to be taken unpleasantly amid hopes that fundamentals (while not necessarily improving) might have at least been bouncing along the bottom. But the [guidance] cut is suggestive of material broad-based deceleration (in the best case) while potentially fueling concerns over the possibility of company-specific issues (in the worst case). At a minimum, analysis suggests the company's share position has demonstrated consistent stability (and we are loathe to read much from any single quarter), but investors are likely to at least leave the question out on the table for the time being."
- Stacy Rasgon
Morgan Stanley, Equal-Weight, Price Target Reduced From $110 to $109
"We had previewed weakness, but were surprised at the magnitude, with guidance midpoint 6-7 points below seasonal; we won't see year-over-year growth until quarter three 2020 at earliest. We would think fourth quarter revenues down 14% year-over-year could be a sign that we are finally undershipping consumption, but trade tensions add uncertainty. Even with the after hours sell off, valuation is at a premium, not just on forward looking trough numbers (we trade at 22.4x 2020 expected EPS), but also on our prior peak (~21x 2018 EPS)."
- Joseph Moore
Deutsche Bank, Hold, Price Target Reduced From $118 to $115
"Despite investor hopes that TXN would only have 4-5 quarters of negative year-over-year compares, the co's surprisingly weak 4Q guide implies the year-over-year declines will persist, not only for the 5th consecutive quarter, but even into 1Q20 and in all likelihood 2Q2020. While we believe most of this weakness is systematic and reflective of macro/trade-war dynamics, the size of TXN's guide down is likely to bring up questions of how much of this weakness is company-specific."
- Ross Seymore
Goldman Sachs, Neutral, Price Target $111 Unchanged
"The sharp yoy revenue correction implied in TI's 4Q19 guidance coupled with the notion that the company will have under-shipped end-demand for 5 consecutive quarters as of 4Q19 suggests that we are, at least, approaching the bottom of the cycle, in our view. That said, with the stock trading at elevated multiples...we stay sidelined on TXN and continue to prefer sub-sectors or names that have exposure to end-markets/applications where fundamentals are on a path to recovery and where we see potential upside to Street estimates over the next couple of quarters (i.e. Semi Cap, Semi Materials, RF, (NVDA) - Get Report )."
- Toshiya Hari
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