TXN - Embedded Expectations Analysis - 2021 08 12
Texas Instruments Incorporated (TXN:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 23.0x Uniform P/E. At these levels, markets are pricing in bullish expectations for the firm, but management may be concerned about free cash flow generation, the Lehi fab acquisition, and gross margins.Specifically, management may lack confidence in their ability to maintain free cash flow performance, their dividend yield, and the strength of automotive segment results. In addition, they may have concerns about their acquisition of Micron's 300mm fab in Lehi, persisting acquisition costs, and the sustainability of the current demand cycle. Moreover, management may lack confidence in their ability to meet long-term gross margin guidance and sustain net income growth, and they may be exaggerating their competitive strength in 300mm wafer production.
Texas Instruments designs and makes semiconductors that it sells to electronics designers and manufacturers. The company has two reportable segments: Analog and Embedded Processing. The company's analog semiconductors change signals, such as sound, temperature, pressure or images to a stream of digital data. The company's analog segment primary product lines includes: power, signal chain, and high volume. The company's embedded processors are designed to handle specific tasks and can be optimized for various combinations of performance, power and cost, depending on the application. The company's embedded processing segment primary product lines includes: connected microcontrollers and processors.
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