Texas Instruments Stock Gets a Downgrade. The Price Is Too High for the Risks.

Texas Instruments produces the basic semiconductors found in products from cars to consumer electronics. (N. Johnson/Bloomberg)

Key Points

• Mizuho Securities downgraded Texas Instruments to Underperform, citing risks from China exposure and lack of AI focus.
• Analyst Vijay Rakesh reduced the price target for Texas Instruments shares to $150 from $200.
• Texas Instruments trades at 26 times forward earnings. China accounts for 20% of its revenue.

Texas Instruments’ stock price is too high, given the risks the chip company faces over the next year, according to Mizuho Securities.

On Sunday, analyst Vijay Rakesh lowered his rating for Texas Instruments shares to Underperform from Neutral. He also reduced his target for the stock price to $150 from $200.

The analyst believes the company’s exposure to the Chinese market, and auto manufacturing, “could limit revenue growth, while a lack of focus on AI server exposure provides little LT [long term] tailwinds,” he wrote.

Texas Instruments shares were up 1.5% to $179.28 in early trading Monday.

Rakesh noted Texas Instruments trades at 26 times the earnings expected for the coming year versus a five-year range of 14 to 31 times. He also said China accounted for 20% of the company’s revenue.

“Rising U.S.-China trade tensions and increasing threats of tariffs could drive additional downside,” he wrote.

Texas Instruments sells the basic chips that go into products in nearly every sector of the economy, from autos and industrials to consumer electronics. It is scheduled to report its third-quarter results on Tuesday.

The stock is down 4% this year, compared with a 37% rise for the iShares Semiconductor exchange-traded fund.

Write to Tae Kim at tae.kim@barrons.com