Credit Suisse Group Analyst John Pitzer has a “neutral” rating on Texas Instruments Incorporated (TXN), but he says there is little fundamental risk in the stock. He says there may be better-levered ways to play the semiconductor sector at this point, but he would not recommend selling Texas Instruments.
“It’s a very liquid stock with little fundamental risk, and the management has been very willing to give excess cash back to shareholders in the form of dividend and buybacks,” Pitzer says. “That’s kind of a hard combination to dislike.”
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Texas Instruments plays in the analog and embedded parts of the market, Pitzer says. They are the dominant company in those markets, which Pitzer says makes the stock attractive, particularly to generalist investors.
“They’re going to have continued consistent good cash flows,” Pitzer says. “In fact, if you look at their earnings power from a cash basis, they can earn $3.30 of cash earnings next year; the stock is not that expensive relative to that.”
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