Over the past 12 months, individuals directly associated with US semiconductor manufacturer Texas Instruments (TexasInst) sold shares worth a total of more than US$6.9 million. The biggest contributor was CEO Richard Templeton, who disposed of shares worth US$5.9 million. What could this mean for the value of this company's shares?
Situation of the semiconductor industry
Since we learned of Warren Buffett's biggest purchase in Q3 of this year, which was the world's largest semiconductor manufacturer Taiwan Semiconductor (TaiwanSemic), interest in the sector may have increased significantly. Since then, shares in the Taiwan-based company have risen by more than 30 per cent.
Source: Conotoxia MT5, TaiwanSemic, Daily
Data from the MacroMicro portal shows that the volume of new electronic equipment orders in the United States increased by 6 per cent year-on-year in October, and semiconductor demand appears to be largely dependent on these orders. Semiconductor billing volumes increased by 11.55 per cent y/y in the US, while global demand fell by 3 per cent y/y. The US is the world's largest single customer for these products, with a market share of as much as 22 per cent. However, 62 per cent of global demand is provided by the Asia-Pacific region (excluding Japan). Here, we could see a decline in purchase volumes of 11.51 per cent year-on-year. Which may confirm the slowdown announced by many analysts for this sector, and especially for China, which seems to have been struggling with pandemic problems in recent months, compounded by the zero-Covid policy.
Financial situation of Texas Instruments
The financial figures of the semiconductor manufacturer in question may suggest success. Revenues have been on a continuous upward trajectory over the past nine quarters, currently up by 12.88 per cent year-on-year. Over the same period, operating profit has increased by 16.18 per cent year-on-year. The company also boasts a steadily increasing net profit margin, which currently stands at 44 per cent, against a sector average of 35.9 per cent, which may confirm the company's competitive advantage. According to an analysis by Heavy Moat Investments comparing Texas Instruments to the largest US semiconductor manufacturer Intel (Intel): "Texas Instruments has a much more asset-light business model. The significant difference between the two companies is that TI manufactures Analog Chips while Intel manufactures Digital Chips. We can see that Intel requires a much higher CapEx than TI, even though TI has also ramped up CapEx. TI also produced much higher and rising margins, while Intel has seen margins plummet in recent years due to a switch in business models."
The stock market saying seems to be: "there are many reasons to sell a stock, but only one to buy it". In this case it may well apply.
What does Wall Street think of Texas Instruments' share price?
According to the Market Screener website, the company has 32 recommendations, and the majority of them read: "Hold". The average target price is set at $172.39, which is around the last closing price. The highest target price is at USD 230 and the lowest is USD 140.
Source: Conotoxia MT5, TexasInst. Daily
Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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