Texas Instruments Takes a Downgrade (TXN)

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Shares of Texas Instruments (NYSE: TXN) are trading lower this morning.  The culprit is a downgrade out of American Technology Research.  Analyst Doug Freedman has cut the chip maker from a Buy rating down to Neutral as the company’s wireless exposure should keep its P/E multiple from expanding in the face of perceived market share loss in the wireless sector and uncertain demand in 3G handsets. 

Interestingly enough, Freeman kept his earnings target fopr 2008 at $1.84 EPS.  That is still under First Call targets of $1.97 for 2008 EPS.  AmTech’s $28.00 price target reflects a 14-times 2008 earnings, and it sees a year over year drop of 1.6%.

Freedman also notes that it isn’t a bad situation in his report: "Our downgrade should not be viewed as a lack of confidence in the TXN management team, which we continue to view as one of the best in the industry. However, we are looking to bring our rating in-line with our near-term expectations and better reflect ongoing investor concerns. If we could identify a positive catalyst to turn investor sentiment, we would be out defending a longer term view given the recent compressed valuation."

So far shares of Texas Instruments are down about 0.4% at $28.00.  This morning’s intraday low is $27.73 and the 52-week trading range is $27.51 to $39.63.

Jon C. Ogg
March 20, 2008