Bernstein analyst, Stacy Rasgon, has recently reaffirmed his Underperform rating for Texas Instruments (TXN) shares and reiterated the $145 price target for the stock. As the company prepares to release its third-quarter results next week, there are concerns among investors of a potential disappointment.
According to Rasgon, there is tactical risk to Q4 estimates, which may prompt a substantial reset to 2024 numbers on the guide. This cautious outlook is reflected in the market as Texas Instruments shares fell by 0.6% to $150 during early trading on Friday.
The main concern highlighted by the analyst is the aggressive nature of Texas Instruments in building up its capacity, even if there isn’t enough demand to fully utilize the factories. This strategy is expected to negatively impact the chip maker’s gross profit margins going forward.
“We are at the start of a multiyear investment cycle that will likely result in the underperformance trend continuing as they execute on it,” Rasgon commented.
As a provider of basic chips used in various sectors, including autos, industrials, and consumer electronics, Texas Instruments is often considered a bellwether for the semiconductor industry and general economy. Therefore, the upcoming Q3 report will be closely monitored.
Year-to-date, Texas Instruments’ stock has declined by 9%, while the iShares Semiconductor exchange-traded fund (SOXX) has seen a 33% rise. The performance of the ICE Semiconductor Index is tracked by the ETF.
Texas Instruments is scheduled to release its third-quarter results on Oct. 24.