High-Yield Texas Instruments Poised to Rebound in 2025

Key Points

• Texas Instruments guidance was weak but calls for growth to resume in 2025, and forces are in play to accelerate it over the next five years. 
• Analysts trimmed their price targets for TXN stock but are steadfast in their sentiment, rating it a Hold with potential for a double-digit upside this year. 
• Capital returns are solid and likely to grow in 2025 and 2026. 

High-yielding Texas Instruments NASDAQ: TXN stock is nearing a bottom and is poised to rebound strongly in 2025. The company’s business contracted in 2024 but is reverting to growth in 2025, and the long-term outlook is robust. Its position in the microchip market is well-established and will be supported by a global, AI-related upgrade cycle for decades. Texas Instruments is a critical piece of semiconductor infrastructure, controlling most of its production capabilities, which are primarily in the United States. That, along with its high-volume, high-quality, low-cost 300mm production capability, ensures its place in the analog and embedded semiconductor industry will remain solid. 

The dividend is attractive and central to the stock's higher-than-average valuation. TXN stock yields about 3% in early 2025 and is a safe and reliable payment. The payout ratio is a concern, with distributions running near 100% last year, but the growth outlook and financial condition offset it. Texas Instruments is forecasted to grow by a low single-digit amount in 2025 and then accelerate to a double-digit CAGR over the next four to five as capital expenditures recede in the wake of an investment cycle. 

The balance sheet reflects the impact of reduced earnings power at the end of Q4 2024, with long-term debt up year-over-year, but no red flags were raised. Increased assets, low leverage ratios, and steady equity offset the debt increase. Regarding leverage, Texas Instruments' total liability is about 1.1x equity and primarily its long-term debt; long-term debt is about 0.75x equity and 1.7x the cash and short-term investments, leaving it in a lean condition capable of sustaining its distributions and distribution growth while the earnings quality improves. 

Texas Instruments Pivoting Back to Growth

The Q4 results were much better than expected, with revenue contracting only 1.7% to $4.01 billion. The contraction is the slowest in over two years and has the company on track to pivot back to growth in Q1 2025. Segmentally, growth in the analog and “other” business was offset by significant weakness in the embedded segment. It contracted by nearly 20% but is expected to bottom soon and become a growth driver as IoT demand increases. 

The margin news is also good. The company sustained a healthy margin despite the impact of revenue deleverage and beat the consensus figure by a solid margin. The $1.30 in GAAP EPS is down $0.16 compared to last year but beat MarketBeat’s reported consensus by a dime or over 800 basis points. 

Guidance is the weak spot in the report. The guidance is positive, with growth expected, but it failed to impress the analysts. The net result is that 100% of the analysts covering TXN stock reduced their Q1 targets, which will weigh on the stock price in Q1. However, analysts' sentiment remains firm at Hold with a bullish bias. MarketBeat tracks 22 analysts with sentiment ratings; 12 are pegged at Hold and eight at Buy, with only two sellers in the group. The post-release activity includes five revisions within the first few days, including three price target reductions and two reiterations. The takeaway is that their consensus average is near $200, sufficient for a double-digit upside from TXN critical price support targets. 

Texas Instruments Stock Price Falls to Critical Trigger Point

Texas Instruments stock price is pulling back in early 2025 but approaching a critical trigger point for buying: the 30-month EMA. The 30-month EMA has triggered buying and long-term upswings in this stock’s price numerous times, and there are already signs of support in the price action. The critical support target is near the $180 level and will likely be reached in early 2025. The risk is that this market could fall below that level and confirm it as resistance if business momentum fails to improve.