Trade of the Day: Texas Instruments Incorporated (TXN)

Texas Instruments Incorporated (NASDAQ:TXN): Texas Instruments is one of the world’s largest manufacturers of semiconductors. It is also a well-known producer of scientific calculators and DLP products for TVs and video projectors. And this year, TXN stock is also a winner, up 11% versus the 8% gains of the S&P 500.

First-quarter EPS beat Standard & Poor’s estimate of 85 cents per share, and similar consensus earnings estimates, by 11 cents. Sales grew at a surprising 13% on higher demand for both analog and embedded processors, and margins grew on higher volume. S&P estimates that there will be more chips in vehicles and that Texas Instruments’ shares will benefit from an acceleration of high-end smartphone sales.

Credit Suisse’s price target for TXN stock is $95 on the basis that it is growing faster than its peers and thus should be valued at 20 times 2018 estimated earnings of $4.50 to $4.65. Texas Instruments also throws off a 50-cent quarterly dividend that comes out to a yield of about 2.5%.

Since consolidating gains made in the first half of 2016, TXN shares advanced from about $72 in December to a high of almost $83 in late April. From March to May, the stock formed a triple-top which, if exceeded, would probably result in a new leg up.

Support is at the conjunction of the bullish support line and the 50-day moving average at $80.20. Last week’s recovery from a break below that line is a positive development. Volume has been mixed, but MACD is positive.

Buyers should probably take action only if the stock closes over $83. Thus, buy TXN at $83.50 with a trading target of $95 for a proposed return of about 14%.

TXN stock chart view 1
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