MW This 'unique' chip stock is now a buy, analysts say
By Britney Nguyen
Texas Instruments is in a good spot to benefit as the industrial sector recovers and its U.S. footprint lessens tariff risk, per TD Cowen analysts
Texas Instruments Inc.'s stock was upgraded on Thursday by analysts who are more confident in recent developments in the industrial semiconductor sector.
Analysts at TD Cowen moved to a buy rating from their previous hold stance in a late Thursday note to clients about Texas Instruments (TXN). While recent years have brought challenges in the industrial and automotive markets, the analysts think Texas Instruments is in a good spot to benefit from a recovery in those sectors.
Despite ongoing concerns with looming tariffs and macroeconomic conditions, the analysts said they think the company can "outperform in either a sharp or gradual recovery." The company has good visibility into its business trends and a U.S. footprint that helps reduce its exposure to tariff threats, they added.
Texas Instruments "may have some of the best insight into true end demand, and [could] react more competitively as a result, both near term and long term," according to Thursday's note.
The analysts lifted their price target on the stock to $245 from $200, with the new target about 11% above the $221.40 level where they recently changed hands Friday afternoon. The stock set a new all-time intraday high, according to Dow Jones Market Data, and needs to close above $220.29 to achieve a new closing high. Shares are up more than 18% so far this year.
The upgrade comes even as analysts acknowledge the stock is expensive relative to historical averages. "Valuation is rich," the TD Cowen team said. Their note contains charts indicating Texas Instruments shares are trading above their five- and 10-year averages on multiples like price to forward earnings and enterprise value to forward free cash flow. But the analysts see Texas Instruments as a "unique asset" that helps make up for the valuation points.
In TD Cowen's view, the chip maker's growth profile and free-cash-flow margin "warrant a premium" for its stock. The analysts estimate a growth profile of roughly between 7% and 10% "through-cycle," or in the long-term when normalizing cyclical swings in the market. Meanwhile, they think free cash flow will normalize, leading to a 35% margin on the metric.
They screened more than 400 companies across the technology, media and telecommunications categories. Texas Instruments "was one of 5 companies that meet this criteria at scale," the analysts said.
"Perhaps most compelling, in our view, is the defensibility that [Texas Instruments] offers," the analysts said. They now think the company could generate more than $7 in free cash flow per share even in more subdued demand outlooks. That helps support their view that the stock has a floor north of $200.
The analysts see Texas Instruments as "the long-term leading steward of capital" in its industry, with its analog and embedded businesses driving growth in gross domestic product.
-Britney Nguyen
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July 11, 2025 15:11 ET (19:11 GMT)
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