BofA Securities Upgrades Texas Instruments to Neutral

BofA Securities analyst Vivek Arya upgraded Texas Instruments (NASDAQ: TXN) from Underperform to Neutral with a price target of $235.00 (from $185.00).

“TXN delivered an in-line Q4 though with stronger GM (industrial mix) and FCF (capex control).

Q1 outlook was the star of the show, guided up +2% QoQ/+11% YoY to $4.5bn midpoint ahead of consensus’ $4.4bn and normal seasonality flat/slightly down.

TXN commentary was more optimistic than extremely bullish, likely because of last year’s mixed trends.

Still, we positively highlight management’s commentary re improving backlog, order trends, data center strength (9% of sales, up 64% YoY in CY25) and potential for continued FCF growth.

On the negative side, TXN avoided any discussion of factory loadings to not signal potential Q2 trends.

All-in, we raise CY26/27E pf-EPS by 8%/7% to $6.23/$7.12 and take our PO to $235 from $185, now on 33x CY27E PE vs 28x prior on better recovery momentum and visibility, but still within historical 17x-36x range.

Related, our FCF forecasts move up 14-1-5% for CY26/27E towards $7.13/$8.20 per share, leaving room for management’s longer-term outlook for $8-$12/share.

Upcoming capital management event (Feb-24) next catalyst and could feature more steps towards achieving FCF targets and improved returns/buybacks.

Our Neutral rating signals a balanced mix of improving FCF but below peer sales growth (8-10% vs peers growing double digits).”

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