Is The Market Pricing Texas Instruments Fairly?

-4.78%
Downside
175
Market
166
Trefis
TXN: Texas Instruments logo
TXN
Texas Instruments

Texas Instruments (NASDAQ: TXN) has seen strong growth in recent years. The company saw its revenue grow by 12%, while its stock soared by 43% due to strong performance in the automotive & industrials market. The company should benefit from increasing demand for chips from the auto industry, driven by autonomous and semi-autonomous vehicles and other technological advancements. We expect the company to post strong results in 2018, and have created an interactive dashboard outlining our forecasts.

Our price estimate of $107 is based on expected overall revenue of $15.7 billion in FY 2018 and a P/E multiple of 27x. We expect TI’s net income margin to improve to 25.7%, from 24.6% in FY 2017, as a result of strong demand from the automotive & industrial sectors, higher production of 300mm fabs, as well as a lower tax rate. The 26% margin would imply net income of $4 billion. 

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Our valuation methodology above suggests that Texas Instruments will post solid results in 2018. The company’s P/E ratio, currently higher than that of the industry, will likely fall in 2018. 

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