Texas Instruments Stock Leads Analog Chip Shares Lower

Texas Instruments (TXN) shares tumbled Friday, leading other analog chipmaker stocks lower and weighing on the major indexes.

Texas Instruments was the worst-performing stock in the S&P 500, with shares falling more than 7% to close at $185.52 Friday. The move came a day after the company’s disappointing profit forecast stoked concerns that the analog chip market could face a slower recovery than anticipated. 

Shares of Microchip Technology (MCHP), Analog Devices (ADI), Onsemi (ON) and NXP Semiconductors (NXPI), also lost ground, with the tech sector dragging the benchmark index lower. The S&P 500 was down 0.3%, while the tech-heavy Nasdaq slipped 0.5%. 

Jefferies analysts said Texas Instruments’ outlook dashed hopes it would signal a recovery and indicated the cycle may not have reached a bottom, with the auto segment “still correcting further and no signs of Industrial recovery yet.” Over 70% of Texas Instruments’ products are sold into auto and industrial end markets, according to Jefferies. 

The analysts suggested a recovery for the analog segment could still come later this year or next, but warned Texas Instruments’ spending and growing inventories could prove more significant headwinds than anticipated, pressuring margins.  Jefferies maintained a “hold” rating and $185 price target for the stock.

Morningstar Strategist Brian Colello, who raised his price target to $185 from $175, called it “a bit of a near-term reckoning” for Texas Instruments after several quarters of inventory buildup, but said he remains confident in the company’s trajectory, adding that its investments in higher-margin chips could pay off in the longer term. 

Seven of the 12 analysts polled by Visible Alpha gave the stock a “hold” rating as of Friday, while three gave it a “buy” and two held “sell” ratings. Their consensus price target at about $205 would suggest close to 11% upside.