Texas Instruments (NASDAQ: TXN)
Technology; Semiconductors; BUY
Analog ICs will witness the fastest semiconductor growth
rate in coming years. TXN is a major provider of analog ICs. Product analysis
reveals differentiation; IC count increased in iPhone 6s. Transition to 300mm
will bring cost savings; valuation reveals 25% asymmetric upside.
TXN
generates majority of its revenue from the sale of its analog ICs. For the past
couple of years the company has been producing more than 50% of company’s total
revenue from this particular segment. This indicates that the company relies
significantly on its Analog operations for the majority of its sales. In 2014, TXN
was the leading supplier of Analog ICs with a market share of 18%.
Analog operations contributed 62% towards total revenue while embedded
processors and other products contributed 21% and 17% respectively.
Based on the current price, we believe that TXN adds
considerable value to investors’ portfolio given the introduction of new
differentiated products, 200 mm to 300 mm wafer fabrication transition plan, improving
CSR position, re-allocation of resources and increased chip count in Apple’s
products. Our valuation model also demonstrates significant upside
potential. Overall, Texas Instruments is a decent buy.
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