Texas Instruments stock price continued its strong rally after publishing strong results and forward guidance. The TXN stock jumped to a high of $196, its highest level since September 3. It has soared by nearly 30% from its lowest level in December.
Texas Instruments’ business is thriving
Texas Instruments, a major player in the semiconductor industry, reported relatively strong financial results. Its revenue rose by 10% in the fourth quarter to over $4.42 billion, higher than what analysts were expecting.
This growth is a sign that customers have pared back their inventories and started buying again. Growth is happening across various industries, such as the automobile and factory sectors.
The company also boosted its forward guidance. It now expects that its first quarter revenue will be between $4.32 billion and $4.68 billion, higher than what analysts were expecting.
Data compiled by Yahoo Finance shows that the average revenue estimate among Wall Street analysts is $4.42 billion, up by 8.7% from the same period last year.
Most notably, analysts expect that its acceleration will continue. The average estimate is that its annual revenue will be $19.17 billion this year, a 8.40% increase from what it made last year.
Organic growth will then grow by 10% this year to $21.15 billion. Similarly, the earnings per share is expected to rise from $6.18 this year to $7.15 in 2027.
Texas Instruments’ business often goes through booms and busts because of its industry. Unlike the flashy semiconductor companies like AMD and NVIDIA, it makes relatively boring chips. It makes analog chips, which convert real-world inputs into electronic signals.
Texas Instruments is also benefiting from the ongoing artificial intelligence (AI) boom. Its data center segment continued improving, a trend that the management expects will continue.
READ MORE: Texas Instruments shares tumble 8% on weak outlook as analysts cut targets
TXN valuation concerns remain
Texas Instruments’ management has done well to turn around the business. It slowed production as inventories rose, and the company has continued to reward its shareholders.
The challenge, however, is that the company has become a highly overvalued one. Its forward price-to-earnings ratio remains at 35, much higher than the sector median of 25, and higher than the five-year average of 26.
The company’s forward EV/EBITDA of 10 is higher than the sector median of 3.6. This explains why the stock is trading higher than the average analyst estimates.
Texas Instruments stock price analysis
The daily chart shows that the TXN stock price has rebounded in the past few months. It has jumped from a low of $152.7 in December to over $200 today.
The stock formed an inverse head-and-shoulders pattern, a popular bullish reversal sign. It has now moved above the neckline at $186 and formed a golden cross pattern.
Therefore, the most likely scenario is where the stock will keep rising as bulls target the key resistance at $218, its highest level in July last year. This target is about 11% above the current level.
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