Texas Instruments' (TXN) gross margins are expected to lag behind industry peers until 2026, while free cash flow benefits are seen "somewhat overstated," Morgan Stanley said Friday in a note.
The company's gross margins have declined significantly, from above 70% to the mid-50% range, the firm said, following the release of Q4 results.
"While we see enthusiasm growing for the stock as we approach the end of the capital spending surge, we remain underwhelmed," Morgan Stanley said, keeping its underweight rating on the stock while trimming the price target to $165 from $167.
The firm revised down its 2025 and 2026 gross margin and earnings per share estimates for Texas Instruments even as it kept revenue forecasts largely unchanged.
For 2025, Morgan Stanley now sees gross margin of 56.7% and EPS of $5.18, down from its prior estimates of 57.2% and $5.43. For 2026, the estimates have been revised to 57.7% for gross margin and $6.33 for EPS, from $59.4% and $6.68, the firm said.
Shares of Texas Instruments were down about 6% in recent trading.
Price: 188.85, Change: -11.76, Percent Change: -5.86
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