Texas Instruments Inc. (TXN) stock prices were up 3.45% as of the market close on July 22nd, 2021, bringing the price per share up to USD$194.24 at the end of the trading day. Subsequent premarket fluctuations saw the stock fall by 4.86%, bringing it down to USD$184.80.
Soft Financial Expectations
Despite the company’s revenue forecast for the current fiscal period disappointing some investors, the company is confident regarding its trajectory of success. Investors are concerned that the recent momentum seen in chip demand growth caused by the onset of the global coronavirus pandemic will be short-lived. TXN reported expecting sales ranging from USD$4.4 billion to USD$4.76 billion for the fiscal quarter ending in September of 2021, representing a profit per share ranging from USD$1.87 to USD$2.13 a share.
In line with the success seen by the chipmaking sector, TXN has reported several consecutive quarters of double-digit percentage revenue growth, largely driven by increases in demand for a range of devices that use the company’s tiny electronic components. The extent of the growth seen by the sector has raised concerns that at least some of the movement is a result of panic buying from customers concerned about future shortages, that may not actually occur. Such stockpiling behavior has historically been associated with crashes.
Lower Inventory Levels
The company’s management reported in-house inventory having fallen to 111 days for the quarter, down from the average of 130 to 190 days it has typically maintained. The length of time between the placement of an order and the delivery to customers referred to as the lead time, has been increasing for an increasing range of TXN’s offerings.
TXN, which is based out of Dallas, has an extensive catalogue of products in the tens of thousands and a massive customer base of more than 100,000. The company manufactures an array of products ranging from phones to military hardware and addresses a substantial chunk of the electronics market, facilitated by its extensive reach as the largest manufacturer of analog and embedded processing chips. The industrial machinery sector is particularly significant supplied by the company’s offerings.
Future Outlook for TXN
Despite the company not being able to maintain its recent trajectory of success, TXN is poised to capitalize on strategic opportunities to ensure an organic acceleration of its growth. The company is keen to adapt to the evolving chip market, with its decisions being founded in evidence-based foresight. Investors are hopeful that the company will be able to usher in significant and sustained increases in shareholders.