Texas Instruments Falters as BofA Downgrades on Valuation Concerns
Analyst warns of 'rich valuation' compared to peers and cuts price target, citing macroeconomic headwinds for the chipmaker.
Shares of Texas Instruments (TXN) faced pressure after Bank of America analysts delivered a more cautious outlook on the semiconductor firm, citing a valuation that appears stretched compared to its industry counterparts. The bank , signaling concerns over the chipmaker's near-term growth prospects amid a challenging economic environment.
In a note to clients, BofA also slashed its price target on Texas Instruments from $208 down to $190 per share. The downgrade is rooted in several key factors, primarily the belief that the company's stock is overpriced relative to its peers, especially when considering its lower free cash flow margins. The analyst warned that and potential global tariffs could continue to suppress demand across the critical industrial sector, a core market for Texas Instruments.
Further fueling the bearish sentiment, the report highlighted Texas Instruments' limited exposure to the booming artificial intelligence (AI) capital expenditure cycle, which has been a significant tailwind for other players in the semiconductor space. BofA adjusted its financial forecasts accordingly, cutting its earnings per share (EPS) estimates for fiscal years 2026 and 2027. The revised projections now stand , reflecting a more subdued outlook on the company's profitability.
The move from a major Wall Street firm underscores the growing scrutiny on valuations within the chip sector as investors weigh the impact of a potential global economic slowdown. While the long-term demand for analog and embedded chips remains robust, the downgrade suggests that, for Texas Instruments, a period of price correction may be necessary to align its stock value with its fundamental performance and the it currently faces.