Texas Instruments (NASDAQ:TXN) and Analog Devices (NASDAQ:ADI) slipped on Tuesday as investment firm Cowen started coverage on both semiconductor companies.
Texas Instruments: Analyst Joshua Buchalter started Texas Instruments (TXN) with a market perform rating and a $170 price target, noting the company is the “premier long-term steward of capital” in the industry, but in an uncertain environment, necessary investments are likely to hurt gross margins and free cash flow.
“We await more confidence in the macro/pricing backdrop or a more attractive entry point before recommending investors add to positions,” Buchalter wrote in a note to clients.
The analyst added that Texas Instruments (TXN) has a “best-in-class” margin profile and a multi-decade track record of strong operational execution, with multiple growth drivers to help the company’s business, particularly in automotive and industrial.
Despite these multi-decade trends and a mid-to-high single digit total addressable market growth opportunity over the next decade, a shallow downturn may hurt Texas Instruments (TXN) in the near-term, Buchalter conceded.
“While we are much more in the ‘soft landing’ camp than a sharp reversion to past levels, we do feel it prudent to model the analog industry down low mid-single digits (%) and MCUs down high single digits (%) in 2023,” Buchalter explained.
Texas Instruments (TXN) fell nearly 2% to $153.68 in early trading.
Analog Devices: Buchalter also started coverage on Analog Devices (ADI), noting that shares currently offer an “attractive value, balancing both capital returns and secular growth” in an environment where tech investors are looking for safety. Buchalter started Analog Devices (ADI) with an outperform rating and a $180 price target.
The analyst added that Analog Devices (ADI) has built a “broad analog [integrated circuit] portfolio via acquisitions and organic growth in an effort to “drive industry-leading margins.”
Analog Devices (ADI) fell more than 1% to $139.18 in early trading.
Separately on Tuesday, Citi cut its 2022 and 2023 earnings estimates on several analog semiconductor companies, including Texas Instruments (TXN), as the firm believes orders are being pushed out and cancellations are happening.