UBS Survey Reveals Potential Upturn in Semiconductor Orders for 2024
A recent global survey conducted by UBS has shed some light on the semiconductor industry’s future prospects. The survey focused on semiconductor distributors and direct customers, providing insights into lead times and expectations. One key finding of the survey is the bottoming of expectations around lead times, indicating a potential upturn in orders for the year 2024.
Texas Instruments Upgraded to Buy by UBS Based on Positive Survey Findings
Based on the positive findings of the survey, UBS analysts have upgraded Texas Instruments (TXN) to a Buy rating. The analysts have also raised the price target for TXN from $170 to $195. This upgrade is driven by the optimistic outlook for the semiconductor industry as lead times stabilize and pricing remains strong.
UBS analysts believe that Texas Instruments will be among the first companies to benefit from the expected increase in orders. Unlike other companies in the industry, Texas Instruments has very little lag time between orders and revenue turning higher. Additionally, Texas Instruments has cleaner comps and fundamentals, as it did not employ supply agreements during the peak. This positions the company well to capitalize on the improving market conditions.
Lead Times Stabilize, Pricing Remains Strong in Semiconductor Industry
The stabilization of lead times and the strong pricing in the semiconductor industry is seen as a positive sign by UBS analysts. Although there are relatively high inventory levels within distribution, direct buyers have reduced their inventory, with approximately 15% reporting levels below target. This indicates a better balance between demand and supply, which is essential for the industry’s growth.
The positive survey findings suggest that the semiconductor industry is poised for a potential upturn in orders. This is welcome news for an industry that has been grappling with supply chain disruptions and a shortage of chips over the past year.
TXN Stock Rises 2% on Upgrade, Optimism for Revenue Inflection
Following UBS’s upgrade of Texas Instruments to a Buy rating, the stock saw a 2% rise in early Friday trading. This upward movement comes on top of a 2.8% increase in TXN stock at the end of the previous trading day. Market investors are showing optimism for the company’s future performance, given the positive survey findings and the projected revenue inflection.
Investors are also taking into account the strength of Texas Instruments’ fundamentals and its ability to quickly convert orders into revenue. With lead times stabilizing and pricing remaining strong, Texas Instruments is well-positioned to capitalize on the anticipated increase in orders.
UBS Raises Revenue Forecasts for TXN, Cites Strong Survey Results
The encouraging survey results have led UBS analysts to raise their revenue forecasts for Texas Instruments. They have increased the revenue forecasts by 170 basis points in 2024 and 450 basis points in 2025. The new revenue forecast for 2025, at $21.6 billion, is now 10% above the consensus estimate.
Furthermore, UBS analysts highlight the undervaluation of TXN stock, which currently reflects a slower ramp in free cash flow (FCF). With the projected revenue inflection and the potential for CHIPS grants/credits, UBS believes that Texas Instruments’ FCF will outperform market expectations. This optimistic outlook for the company’s financials supports UBS’s decision to upgrade Texas Instruments to a Buy rating.
In conclusion, the UBS survey findings provide a positive outlook for the semiconductor industry, with the potential for an upturn in orders in 2024. The upgrade of Texas Instruments to a Buy rating by UBS reflects the company’s strong market position and the expectation of improved performance. As lead times stabilize and pricing remains strong, Texas Instruments is well-positioned to benefit from the anticipated increase in orders. Investors are responding favorably, as shown by the rise in TXN stock and the raised revenue forecasts by UBS analysts.
Analyst comment
Positive news: The UBS survey reveals a potential upturn in semiconductor orders for 2024. Texas Instruments is upgraded to a Buy rating by UBS based on positive survey findings and the company is well-positioned to capitalize on the improving market conditions. Lead times stabilize and pricing remains strong in the semiconductor industry, indicating a better balance between demand and supply. TXN stock rises 2% on the upgrade and optimism for revenue inflection. UBS raises revenue forecasts for TXN, citing strong survey results. Overall, the news is positive for both the semiconductor industry and Texas Instruments, with expectations of increased orders and improved performance. Investors are responding favorably.
