Analyst Note| Brian Colello, CPA |
Texas Instruments reported relatively healthy second quarter results, consistent with the better-than-expected revenue updates provided by some of the firm’s peers in recent weeks. We’re also encouraged by TI’s outlook for the third quarter, as business conditions in most end markets (excluding automotive) have not significantly deteriorated due to the COVID-19 pandemic. Management continues to take a cautious tone toward future demand, as it is possible that the hearty sales levels stem from customers building up inventory in order to protect themselves in the event of future supply chain disruptions, rather than robust manufacturing activity. That said, TI did see a boost in end market demand from the medical end market, as well as tech sectors exposed to remote working trends. We are raising our fair value estimate for wide-moat TI to $120 from $115. However, shares still appear modestly overvalued to us.