A Look at Texas Instruments (TXN) Valuation Following Strong Q3 Growth and Higher Dividend

Texas Instruments (TXN) just released its third-quarter results, showing a 14% jump in revenue compared to last year. This increase was mainly helped by strength in analog and embedded processing sales. The company also announced a 4% dividend boost.

See our latest analysis for Texas Instruments.

Despite topping expectations with robust Q3 results, Texas Instruments’ share price momentum has remained sluggish, with a 1-year total shareholder return of -18% and the stock currently trading at $157.32. The recent results sparked a brief uptick, but longer-term performance suggests confidence is still rebuilding. The company continues to prioritize steady growth and dividends.

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Given the recent gains but ongoing caution in the outlook, investors might wonder if Texas Instruments is currently trading at a discount that reflects the future upside or if the market has already priced in the next phase of growth. Is this a buying opportunity, or is everything accounted for in the current share price?

Most Popular Narrative: 17% Undervalued

Texas Instruments’ most widely followed narrative points to a fair value significantly above the latest closing price of $157.32. Analysts are factoring in a brighter long-term outlook as cyclical pressures ease. Expectations are that gross margin recovery and disciplined inventory management could propel renewed momentum and set the stage for potential upside.

Expansion in automotive semiconductor content, especially for electric vehicles and ADAS, is poised to drive future growth as automotive recovery lags the broader cyclical upturn. With content per vehicle rising and automotive representing a key longer-term demand vector, an eventual rebound could provide incremental revenue tailwinds and enhance gross margins as higher-complexity products ship.

Read the complete narrative.

Want to know what’s driving that bullish price target? Surprising assumptions about revenue growth, profit margins, and capital returns set this narrative apart. The underlying logic may challenge what you thought was possible for Texas Instruments. See what’s fueling the optimism inside.

Result: Fair Value of $189.56 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, competition from new entrants and risks tied to underutilized manufacturing capacity could challenge the optimistic outlook for Texas Instruments’ recovery.

Find out about the key risks to this Texas Instruments narrative.

Another View: SWS DCF Model Offers a Different Angle

While analyst estimates suggest Texas Instruments is undervalued, our SWS DCF model presents a different perspective. The DCF calculation puts the fair value at $147.90, which is below the current price. This result suggests the market has already factored in much of the growth optimism. Does this indicate a hidden risk for buyers, or could the stock still surpass model expectations?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Texas Instruments for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 904 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Texas Instruments Narrative

Prefer your own approach? You can easily dive into the data and craft a Texas Instruments narrative that fits your own view in just a few minutes, all with Do it your way.

A great starting point for your Texas Instruments research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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