Texas Instruments (TXN) Could Be 36% Undervalued Following GE Appliances Supply Win
Texas Instruments (TXN) just secured a larger role inside GE Appliances’ next generation of connected laundry products, with US-made chips set to supply about one third of the new Louisville plant’s semiconductor needs.
See our latest analysis for Texas Instruments.
Even with some recent volatility, including a 7.17% decline in the 30-day share price return and a 7.65% decline over 90 days, Texas Instruments still shows strong momentum. Its 57.49% year to date share price return and 47.41% 1-year total shareholder return reflect renewed optimism around its role in connected devices like GE Appliances’ next generation laundry products.
If this GE Appliances deal has you thinking about where demand for connected and intelligent hardware goes next, it can be useful to scan beyond Texas Instruments and review 55 AI infrastructure stocks
Texas Instruments’ recent surge in returns sits awkwardly next to the short term pullback. Are you looking at a durable shift in the underlying business, or a swing in sentiment that the current valuation now needs to justify?
Most Popular Narrative: 35.8% Undervalued
Texas Instruments last closed at $279.58, while the most followed narrative on the stock points to a fair value of $435.69 using a 9% discount rate. That gap frames a very different view of what the GE Appliances win and broader connected hardware demand could mean over the long run.
Texas Instruments is in the midst of a multiyear capacity-expansion cycle that is temporarily suppressing free cash flow but materially enhancing the company’s long-term competitive position. The buildout of U.S.-based 300mm analog manufacturing is expected to structurally improve cost efficiency, support higher gross margins, and increase supply-chain resilience. As these assets ramp and utilization normalizes, TXN should regain its historical free-cash-flow profile, supported by diversified end-market exposure across industrial, automotive, aerospace/defense, and energy infrastructure.
Want to see why this narrative points to such a large gap to today’s price? It hinges on how revenue, margins and future earnings are expected to reset. The key is how long this capacity build phase lasts and what kind of profitability profile Texas Instruments is modeled to reach on the other side. The full narrative lays out those assumptions in detail without you having to build the model yourself.
Result: Fair Value of $435.69 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Texas Instruments still faces risks if end demand for industrial and automotive chips softens or if its large fab investments take longer to support returns.
Find out about the key risks to this Texas Instruments narrative.
Another View On Texas Instruments’ Valuation
The community narrative points to a fair value of $435.69 for Texas Instruments, yet our DCF model estimates future cash flow value at $241.32 with the current share price at $279.58. On that measure the stock looks expensive. Which set of assumptions do you trust more?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Texas Instruments for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 50 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
After weighing both enthusiasm and concern around Texas Instruments, it makes sense to move quickly and assess the evidence yourself. To see a concise summary of what investors see on each side of the debate, review the 2 key rewards and 2 important warning signs
Looking for more investment ideas beyond Texas Instruments?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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