Texas Instruments (TXN.US) kicks off the chip industry's earnings season, analysts say the semiconductor industry's outlook is mixed
1min read The earnings season is set to fully unfold, with Texas Instruments (TXN.US) leading the semiconductor industry in reporting its financial results. Despite the apparent signs of industry recovery in the previous quarter, analysts expect challenges in the December quarter for the auto and industrial supply chains due to weak demand for cars and electric vehicles, as well as a lackluster outlook for the industrial market. Additionally, the increasing competition among global companies, especially in the US domestic analog market, has led analysts to downgrade their expectations for Texas Instruments, NXP (NXPI.US), Microchip Technology (MCHP.US), ON Semiconductor (ON.US), and Allegro MicroSystems (ALGM.US), while raising their target price for Texas Instruments to $200.Analysts at Mizuho Securities pointed out that despite the negative sentiment, there are some positive aspects in the analog chip market. They believe that ON Semiconductor and Allegro MicroSystems are in the "best position" in their industry, thanks to their portfolios in renewable energy and non-power-systems-related (i.e., not dependent on a specific type of power system, such as can be applied to both gasoline and electric vehicles) areas.However, the expected 5% to 10% decline in analog prices in the December quarter may dampen any positive sentiment. Analysts also expect a slowdown in electric vehicle growth in 2025, due to a lack of affordable models being launched, which will put pressure on the automotive industry. They expect the average selling price of semiconductors for automotive original equipment manufacturers to decline more than 10% year-on-year in 2025, while the overall analog price will decline by about 5-10% year-on-year.Moreover, with global manufacturing PMIs in the US, EU, and China all below 50, the industrial sector may remain weak for some time. Analysts expect the analog/industrial lead times to continue to shorten, customer inventories to remain high, and demand not to recover quickly.Texas Instruments is set to report its quarterly earnings and guidance after the market close on October 22, with analysts generally expecting the company to report EPS of $1.41 and revenue of $4.12 billion in the third quarter.Despite the challenges, Texas Instruments' target price was raised from $190 to $200, while the target prices for the other four companies were lowered. NXP, Microchip Technology, ON Semiconductor, and Allegro MicroSystems are rated "Outperform," while Texas Instruments is rated "Neutral."
