Before Thursday’s opening bell, Nomura Securities downgraded Texas Instruments (TXN
) from “Neutral” to “Reduce” and has left TXN’s price target unchanged at $33.
Nomura believes that TXN no longer has future margin benefits, and that the price its trading too high relative to its peers.
Romit Shah, an analyst at Nomura, had the following comments about the downgrade: “While TI’s execution has been solid, we believe the company’s performance is well respected and understood. TI is trading at a 10-year high to Intel (85% premium versus an average of +3%) and Qualcomm (10% discount versus an average of -58%). Margin benefits from optimizing free cash flow that have been a big boost to the stock may have run their course. In addition, we believe that revenue growth despite a diminishing wireless drag may continue to be modest. Furthermore, we estimate that share repurchases at current levels are barely reducing share count. Our target price is unchanged at $33 and is based on a multiple of 15x 2014E EPS, excluding net cash.”
Nomura’s price target on TXN suggests a 23% downside to TXN’s current stock price.
TXN shares were inactive in pre-market trading. This year, the company’s stock is up 32.5%
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