Texas Instruments (TXN) is seeing weakness compared with its peers, despite a tactically bullish view for mean reversion, Morgan Stanley said in a note Wednesday.
The company attributed this weakness partly to its approach to non-cancellable orders, the brokerage firm said, adding that while there is some truth to that, there were bigger contributing factors.
Texas Instruments faced significant challenges due to “extreme” shortages in less strategic personal electronics markets, resulting in substantial inventory fluctuations and share loss, Morgan Stanley noted.
Personal Electronics, constituting over 20% of revenue at its peak, declined by 50% between Q2 2022 and Q1 2023, causing earlier weakness. While industrial revenue declined slightly more than peers in the first half of 2023, automotive still grew 20% year over year in September, the firm said.
Texas Instruments also has lower distribution revenue compared with peers, which could reduce inventory a bit, the firm said.
Despite a rebound in industrial and steady automotive growth, Morgan Stanley said it expects Texas Instruments’ gross margins and share repurchases to lag behind peers.
Morgan Stanley raised Texas Instruments’ share price target to $146 from $138 and reiterated the stock’s underweight rating.
TXN shares were down more than 2% in recent Wednesday trading.