We came across a bullish thesis on Texas Instruments Incorporated (TXN) on Substack by The Wolf of Harcourt Street. In this article, we will summarize the bulls’ thesis on TXN. Texas Instruments Incorporated (TXN)’s share was trading at $185.27 as of Jan 30th. TXN’s trailing and forward P/E were 35.63 and 32.79 respectively according to Yahoo Finance.
An automated manufacturing production line of semiconductor components on an assembly line.
Texas Instruments (TXN) reported Q4 2024 earnings with total revenue of $4 billion, declining 3% sequentially and 2% year-over-year. Analog revenue, which makes up 80% of total sales, grew 2% YoY after eight consecutive quarters of decline, signaling early signs of stabilization. However, Embedded Processing, representing 15% of revenue, fell 18%, while the Other segment grew 7%. Profitability was impacted by lower revenue and factory underutilization, with gross profit at $2.3 billion and a 58% gross margin, down 190 basis points sequentially. Operating profit came in at $1.4 billion, with a 34% margin, down 10% YoY, and net income was $1.2 billion, translating to $1.30 per share.
TXN remains committed to capital management, generating $2 billion in operating cash flow and deploying $1.2 billion toward capital expenditures. Shareholder returns remained a priority, with $1.2 billion distributed in dividends, marking the 21st consecutive year of dividend growth, alongside $537 million in stock repurchases. However, Q1 2025 guidance disappointed, with revenue projected between $3.74 billion and $4.06 billion and EPS in the range of $0.94 to $1.16, falling short of market expectations.
As a cyclical business, TXN continues to face headwinds, with industrial markets like automation and energy yet to recover fully. The company is actively reducing factory loadings to manage inventory, reflecting a downcycle that is lasting longer than anticipated. Despite short-term challenges, TXN’s strategic investments in manufacturing capacity remain a key long-term advantage. With nearly 70% of its elevated six-year CapEx cycle completed, TXN is positioning itself with a scalable, low-cost 300-millimeter production footprint, ensuring it can efficiently meet future demand. While near-term volatility persists, these investments solidify TXN’s competitive position, making it a compelling long-term story despite current macroeconomic uncertainties.
Texas Instruments Incorporated (TXN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 57 hedge fund portfolios held TXN at the end of the third quarter which was 50 in the previous quarter. While we acknowledge the risk and potential of TXN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TXN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.