Texas Instruments (TXN) Higher After Strong Guidance But Analysts Not Convinced

Shares of Texas Instruments Inc. (NYSE: TXN) are seeing a nice 4.5% swing higher following raised Q2 guidance after the close. TXN raised its Q2 sales guidance from $1.95-$2.4 billion to $2.3-$2.5 billion, which compares to the Street estimate of $2.21 billion. EPS for the quarter moved from $0.01-$0.15 to $0.14-$0.22, versus the consensus of $0.10.

While investors are cheering the news, the analyst community is more subdued. Here is what some are saying:

Deutsche Bank: While we expect the shares to react positively in the NT (raising P/T to $21), we maintain our Hold rating as the combination of macro uncertainty and pending wireless share losses will likely limit upside for the shares on a 12m basis.

Collins Stewart: We remain cautious on the semi food chain due to sub seasonal demand in the second half for PC/handsets and looming oversupply in other key markets like LCD TVs. We maintain our Hold rating on TXN as it is fairly valued at almost 20x forward earnings."

Auriga: We maintain our Sell rating and $14 target on Texas Instruments (TXN) following an upbeat mid-Q update. Guidance was raised above the high-end of prior range – not entirely surprising given the fact that most semiconductor companies are seeing a sharp snapback from abysmally low Q1 business levels, but TXN is clearly executing well in a very difficult environment. However, even as estimates come up, TXN faces significant headwinds both from weak demand and a tough product cycle in wireless baseband. Even aside from the fact that TXN trades at 23x our NTM EPS estimate of $0.87 (22% above the three-year average valuation), the stock is now at 14x CY08 EPS – it seems difficult to justify an above-market multiple on trailing EPS in a deteriorating demand environment for a company with specific product challenges.

Wachovia was a little more positive. They said, "TI believes it has been shipping below consumption in the June quarter, and that its sequential growth has been driven by diminishing inventory reduction, not inventory replenishment. We believe that the electronics end markets have stabilized but are not picking up as yet, and that the chip industry will broadly benefit from shipments rising up towards consumption in both the June and the September quarters."

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