Texas Instruments (TXN): Evaluating Valuation After Sherman Fab Ramp and Analyst Concerns on Near‑Term Margins

Texas Instruments (TXN) just flipped the switch on its new 300mm fab in Sherman, Texas, a big step for U.S. chip production that also puts its near term margins and earnings recovery under the microscope.

See our latest analysis for Texas Instruments.

The new Sherman fab is landing at a nuanced moment for Texas Instruments, with a strong 1 month share price return of 12.18 percent but a softer 1 year total shareholder return of negative 2.9 percent. This suggests long term momentum is still rebuilding even as investors warm up to the capacity story.

If you are looking beyond Texas Instruments for other chip names riding similar structural trends, this could be a good time to explore high growth tech and AI stocks.

With the stock trading just below cautious analyst targets and headline growth still pressured by heavy capex, is Texas Instruments quietly offering long term value, or are markets already baking in the full benefit of Sherman and beyond?

Most Popular Narrative: 5.3% Undervalued

With Texas Instruments last closing at $178.82 against a narrative fair value near $188.92, the prevailing storyline leans toward modest upside from here.

Management is signaling that the benefits of recent U.S. tax incentives and R&D/capex expensing will materially lower future cash tax rates, bolstering free cash flow and enabling increased capital returns (dividends/buybacks), contributing to long-term earnings per share expansion even in periods of muted sales growth.

Read the complete narrative.

Want to see what powers that cash flow story, even while margins are still healing? The narrative leans on a bold blend of growth, profitability, and a premium but lower future earnings multiple. Curious how those moving parts add up to today’s fair value call and a multi year earnings step up? Dive in to unpack the full playbook.

Result: Fair Value of $188.92 (UNDERVALUED)

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

However, this playbook could unravel if new China tariffs or prolonged underutilization at those 300mm fabs squeeze margins harder and delay the recovery.

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

Another Angle on Valuation

Our DCF model tells a very different story, suggesting Texas Instruments fair value is closer to $125.37, which would make today’s $178.82 share price look stretched rather than cheap. If the cash flow path undershoots the narrative, is the upside already spent?

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 898 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

If you see the numbers differently or want your own angle on Texas Instruments story, you can build a custom narrative in minutes, Do it your way.

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

Looking for more investment ideas?

If you stop at Texas Instruments, you will miss a world of opportunities. Let the Simply Wall St Screener lead you to your next standout idea.

• Capture potential value in mispriced names by scouting these 898 undervalued stocks based on cash flows that could rerate as cash flows strengthen and sentiment turns.
• Ride powerful innovation trends by targeting these 24 AI penny stocks at the center of data driven automation, productivity gains, and long term digital infrastructure growth.
• Boost your income focus by reviewing these 10 dividend stocks with yields > 3% that combine solid yield with businesses built to keep paying through different market cycles.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com