To quote George Peppard's Hannibal Smith from the original A-Team, "I love it when a plan comes together." Texas Instruments' (TXN) relatively bold decision to maintain production capacity during the downturn risked some adverse numbers for gross margins and balance sheet metrics in a slower (or delayed) recovery, but left the company in perfect position to benefit from the sharp rebound in demand for auto and industrial semiconductors. While this period of elevated demand won't last forever, it will do great things for the numbers for a while.
It wasn't as if TI's excellent management was really in doubt, but this is just another confirmation that this really is one of the best-run chip companies in the business. Not everything at TI is perfect (share loss in MCUs merits watching), but there's little question that this is a core holding in the chip space. Still, I thought the shares were expensive back in October, and while they've done well since, they still have lagged the SOX index and chip names I preferred like ON Semiconductor (ON) and STMicroelectronics (STM).
What can be debated is whether today's valuation is still reasonable. TI management would seem to have some doubts, as they've made no buybacks in the last two quarters, despite no liquidity worries. If I dial everything up to "11", I can get to the mid-$170's, but then again I can't rule out at least a couple more strong quarters on this demand rebound. I understand the fear of selling in the $170's only to see the shares hit $200 or more on a blow-off, but while I think TI is a great long-term holding, I won't be buying it for my own portfolio here.
Continue to the full article:
This Recovery Cycle Is Showing Why Texas Instruments Is Among The Best In The Business
No comments:
Post a Comment