Semiconductor Stock Slides on Downgrade

The Wall Street firm is cautious over Texas Instruments' long-term strategy

Deputy Editor
Aug 30, 2023 at 10:17 AM
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The shares of chip maker Texas Instruments Incorporated (NASDAQ:TXN) are down 1.8% at $167.56 this morning, following a bear note from Bernstein. The Wall Street analyst downgraded TXN to "underperform" from "market perform," but maintained its $145 price target.

Bernstein highlighted the semiconductor company's long-term outlook compared to sector peers, as Texas Instruments looks to bolster in-house chip production through capital-intensive initiatives to support 10-15 year of revenue growth. In its note, the analysts said that they "aren't suggesting TXN's strategy is 'wrong' or 'bad,' they just have a longer investment horizon than most other companies." 

Coming into today, covering brokerages were already cautious of Texas Instruments stock. Though eight rate it a "strong buy," 14 say "hold," while one recommends a "strong sell." Meanwhile, the 12-month consensus price target of $183.94 is a 7.8% premium to Tuesday's close. 

Options traders, meanwhile, are more optimistic. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TXN's 50-day put/call volume ratio of 1.44 ranks in the 98th percentile of 12-month readings. Unsurprisingly, there's a shift in sentiment taking place today. The equity's typically quiet options pits have already seen 2,363 puts traded, or five times the average intraday volume. New positions are opening at the most popular position, the weekly 9/1 162.50-strike put.

The latter traders are getting their dollar's worth, too, as options premiums are low right now. This is per the equity's Schaeffer's volatility index (SVI) of 21%, which ranks higher than just 4% of readings from the past 12 months, implying low volatility expectations.

On the charts, Texas Instruments stock is trading back below its 10-day moving average, which briefly provided support this month after guiding shares lower in late July. On a closing basis, the $165 level has kept the security's pullbacks in check of late, and it's stepping into that role once more today. Year to date, TXN maintains a razor-thin 0.5% lead. 


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