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Texas Instruments (TXN) – More than just graphing calculators!

By 10/18/2017 No Comments

Texas Instruments TXN Stock Analysis: If you took calculus in high school or college, chances are you used a “TI” brand of graphing calculator. That was at least my introduction to Texas Instruments, but Texas Instruments is more than calculators for aspiring mathematicians. TI is a top-10 semiconductor company worldwide and probably worth a look if you wish to have a consistently high-performing, dividend yielding tech stock in your portfolio. Here is the IDDA approach to developing an investment strategy for Texas Instruments TXN Stock.

 

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1- Fundamental Points: Texas Instruments TXN stock

Who are they?

Dallas, TX based Texas Instruments (NASDAQ: TXN) is a “tech” company that manufactures semi-conductors and sells them to electronics designers and manufacturers worldwide. TI also dabbles in DLP technology, education innovation, calculators, microcontrollers and multi-core processors.  As of 2016, they generated $4.1 billion in free cashflow, marking 8% compound annual growth rate (CAGR) since 2004.

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In 2016, TI generated $13.37 billion while operating in 30 countries and serving more than 100,000 customers worldwide.  They employee roughly 30,000 employees in the United States, Europe, Asia, and Japan.  Originally founded in 1930 as Geophysical Service Incorporated, the company changed its name to Texas Instruments in 1951.  Since then, they have generated 44,000 patents worldwide and have accumulated a number of awards as an employer including:

  • Forbes “America’s Best Employers”
  • Working Mother “100 Best Companies for Working Mothers”
  • CR Magazine “100 Best Corporate Citizens”
  • Winner of Two Emmys for DLP technology

So we have a long-standing, employee friendly, tech stock that continues to innovate.  Who are they going up against?

Who are their competitors?

Based on market cap, Texas Instruments TXN stock’s top 5 competitors are Taiwan Semiconductor Manufacturing Co. Ltd., Intel, NVIDIA Corp, Broadcom Ltd, and Qualcomm Inc.

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Texas Instruments TXN stock analysis

Important Dates: Texas Instruments – TXN stock will release their next earnings report on October 24th and their next Ex-Dividend Date is October 30th!

What are they doing right?

I get it.  The FANG Stocks (Facebook, Amazon, Netflix, and Google) are sexy.  We love the stocks and we love their products.  However, it may be tough to break into that group.  Facebook alone is priced at $174/share and Amazon and Google exceed $1,000!

As of drafting, TXN is approximately $94 a share and there are two things that make them a particularly tasty analysis.  First – in the last 5 years, TXN is up nearly 350%!  Additionally, if you were to own TXN in that time, you would have enjoyed increased quarterly dividends, because TXN has increased dividends for 13 consecutive years.  FANG stocks are not about returning capital to their investors.

Beyond their commitment to stockholders (which we love), they are committed to their stakeholders – their employees and their communities.  Companies who can take a holistic interest in those vested in them tend to outlast their competition over the long haul.

Stability the Name of the Game at TI?

Jim Cramer labels Texas Instruments as a “steady-eddie” as far as Tech Investments go.  No surprise there.

Good to know: TI’s last dividend was 2.1% or 50 cents per share.

Richard (Rich) Templeton joined TI’s  board of directors July 2003 and assumed the company’s top position in May 2004.  Mr. Templeton’s executive leadership team (ELT) is comprised of men and women whose tenure at TI ranges from the mid-80s to early 2000’s.

What that means is a stable, knowledgeable leadership team, but judging on tenure – not necessarily a team that’s looking to disrupt.  Generally, that translates into stable but not necessarily explosive growth.

This brings us to the second point of IDDA for the Texas Instruments stock analysis: Technicals.

 

2- Technical Points: Texas Instruments TXN Stock Analysis

Even if you’re not quite well-versed in Ichimoku or Fibonacci analysis, at first glance it can appear that Texas Instruments is pushing its limits.  It is well above of the Ichimoku cloud and you can see that if the stock hits resistance, we may see a price drop to around $87, which is the 23% Fibonacci retracement level tracking the general uptrend since the end of 2016.

Texas Instruments TXN Stock 1 year Chart

Texas Instruments TXN Stock - 1 year Texas Instruments TXN Stock – 1 year

 

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Immediate support level is set at $90, based on Fibonacci calculations over the most recent uptrend when the stock price crossed above the daily Ichimoku cloud back in July 2017. If the company misses its earnings this time around, there is a low chance of the price reaching back to the key support of $85.

Texas Instruments TXN Stock - Daily Time Frame Ichimoku Fibonacci Analysis Texas Instruments TXN Stock – Daily Time Frame Ichimoku Fibonacci Analysis

 Beyond the technicals, let’s take a look at Texas Instruments TXN Stock’s Market sentiment.

3- Market Sentiment

There are two charts I’d like us to take a look at.  The first is a macro view of Texas Instruments that can be used in lock-step with our Ichimoku/Fibonacci chart above.

Texas Instruments TXN Stock all-time performance

Texas Instruments TXN Stock All Time Performance Texas Instruments TXN Stock All-Time Performance

Around 1999/2000 – Texas Instruments TXN Stock approached an all-time high.  Around that time, two things happened.  The first was that Texas Instruments went through a 2 to 1 stock split.  The second – there was a huge decline in revenue due to a fallout in the semiconductor industry.

After the 2008 recession, however, Texas Instruments TXN Stock has been on the rise and is once again approaching the historical high.  Remember, traders tend to buy on the rumor and sell on the news.  The most recent climb is most likely due to the upcoming earning’s release and it’s here where we’ll either see a shattering of the historical record or resistance and a market correction.  For me, I’d like to take a look at a few other indicators.  MacD, CCI, and RSI.

Texas Instruments TXN Stock – Other Indicators

Texas instruments TXN Stock - Other Indicators Texas instruments TXN Stock – Other Indicators

The MacD and RSI indicators aren’t suggesting strong signals in either direction, but they are trending downwards.  The market did have a feeling that Texas Instruments TXN stock was perhaps overbought and it’s momentum could be shifting.  The CCI isn’t necessarily sending strong signals either, but it does also appear to be on a downward trend.

With the resistance of reaching an all-time high, the fact that Texas Instruments is well above the Ichimoku cloud and near the top of the Fibonacci analysis, and the alternative indicators such as MacD, CCI, and RSI suggesting a possible correction – one might decide to stay out of Texas Instruments until we see what happens after earnings and perhaps take advantage of a correction.

But let’s bring risk tolerance into play just to be sure!

Texas Instruments TXN Stock Analysis – Investing Strategy

As the 4th point of the IDDA, you must calculate your risk tolerance before deciding on the investment strategy that is suitable for your portfolio. Join us for a free MasterClass to learn more.

In order to make sure Texas Instruments TXN Stock is the right asset to add to your portfolio, you must also conduct risk management for both yourself, and the security you are analyzing. The beta of a stock measures its volatility or systematic risk in relation to the market’s volatility. As increased volatility comes with increased risk, some believe that the beta of a stock is a good indicator to measure risk. The market has a beta of 1, and if a stock has a beta of 1.3, it means that the stock’s volatility is 30% higher than that of the market’s. Some interpret it as 30% riskier than the market as a whole.

Texas Instruments has a beat of 1.29, which means that it is roughly 29% more volatile than the market.  Again – this is most likely due to trading (and options trading) around earnings and possibly investors looking at dividend capture strategies. One can interpret it as slightly riskier than other stocks in the market. You will have to look at your entire portfolio and judge for yourself if this is the right level of risk to add.

Here are Invest Diva’s calculations for important approximate levels, with regards to the Texas Instruments TXN stock analysis.

Support Levels Turning Point Resistance Levels

85.44

88.33

94.27

87.13

90.95

99.94

 

Taking everything into consideration, you will be able to make the right decision on Texas Instruments TXN stock with regards to your portfolio. For further help, and if you want to chat with Kiana regarding your trades, join our investing group here. It’s so fun and you will learn a ton!

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Happy Hunting!

Kris Troy

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