Raymond James analyst Christopher Caso considers the guidance to be "meaningless"
Shares of Texas Instruments (TXN) are under pressure on Thursday after the company reported better than expected second quarter results but gave muted current-quarter revenue guidance, raising concerns that the chipmaker will not be able to meet demand amid the ongoing semiconductor shortage. Following the news, Summit Insights analyst Kinngai Chan downgraded Texas Instruments to Hold as he believes the third quarter outlook reflects some demand uncertainty in the PC and smartphone markets. Still bullish on the name, a peer at Jefferies called the guidance "conservative" and would be a buyer of the shares following the quarterly update.
RESULTS: After market close on Wednesday, Texas Instruments reported second quarter earnings per share of $2.05 and revenue of $4.58B, both above consensus estimates of $1.82 and $4.35B, respectively. Earnings per share included a 6c benefit for items that were not in the company's original guidance. For the third quarter, the company sees earnings per share between $1.87-$2.13, with consensus at $1.97, and revenue of $4.4B-$4.76B, with consensus at $4.58B.
MOVING TO THE SIDELINES: Following the company's quarterly results, Summit Insights analyst Kinngai Chan downgraded Texas Instruments to Hold from Buy as he believes the company's third quarter outlook reflects some demand uncertainty in the PC and the smartphone markets. Additionally, industry checks suggest many of Texas Instruments' industrial customers have been buying ahead of demand in anticipation of supply constraints, Chan told investors in a research note. The analyst thinks there could be some channel inventory digestion in the fourth quarter as pandemic demand tailwinds normalize.
'CONSERVATIVE' GUIDANCE: Also commenting on Texas Instrument's second quarter results, Jefferies analyst Mark Lipacis said he would be a buyer of the shares. The analyst argued that the earnings report was consistent with his recent channel checks that pointed to stretching lead times, robust demand, "much more restocking required" and pricing power. The company guided third quarter revenue 0.4% below and earnings per share 1% above consensus, but Lipacis views its Q3 outlook as conservative, noting that the company has beat its revenue and EPS outlook by 10% and 19% at the median, respectively, over the past six quarters.
Meanwhile, Raymond James analyst Christopher Caso raised the firm's price target on Texas Instruments to $230 from $220 and kept an Outperform rating on the shares following the June quarter results, which he called "puzzling." Caso considers the guidance to be "meaningless," as Texas Instruments has guided revenue flat to down quarter-over-quarter for the last three quarters, yet has significantly beat guidance each time. The analyst feels management likely suffers from a lack of confidence at the macro level, despite what clearly continues to be tight supply conditions at both Texas Instruments and the semi industry at large.
PRICE ACTION: In Thursday morning trading, shares of Texas Instruments have dropped over 5% to $180.14. Semiconductor names like Micron (MU) and On Semiconductor (ON) were also trading lower.