Texas Instruments Inc (NYSE:TXN) released its earnings after the bell Wednesday, and investors cheered. Per-share earnings increased 274% year-over-year, from 34 cents to $1.27, beating the consensus by 3 cents. As of the close Friday, TXN stock is up nearly 10% since earnings. Despite the runup in value, Texas Instruments remains a buy for the long-term …
Texas Instruments has been in business since the 1930s and has been able to see forward well enough to move where the markets are heading. That’s how it ended up as one of the top chipmakers in the world.
It doesn’t make fancy chips for the most part, but it does supply chips that are high-margin chips in high growth markets. But much of its product lines are chips that are fundamental equipment in scores of devices across many industries.
Again, that is the foresight of TXN. It has established itself in growing markets where it can provide quality and consistency at a large scale and a good price. And with the growth of the Internet of Things (IoT), its chips are in greater demand than ever.
As to its place in the tech industry, TXN was one of the companies that launched the computer age. In 1958, it hired a man to solve a very challenging issue regarding that early generation of computers. That issue was notoriously known as “the tyranny of numbers.”
Back then, transistors were new and building computers took massive amounts of people (mostly women) to assemble the circuits. In Texas, without air conditioning, in their version of clean suits, you can imagine what kind of work that was.
Not only did you need to assemble the transistors, but also the capacitors, resistors and other components and then tie them all together with copper wire. It didn’t make for easy work or reliable products.
The tyranny of numbers was the problem of creating more products with these difficult production problems.
Jack Kilby came up with an idea — put all the components on one chip.
And thus, the integrated circuit was born. This eliminated the tyranny of numbers and launched the world into the computer age.
It also won Kilby a Nobel Prize.
The point is, TXN has not slowed down or lost its vision. It makes chips that convert analog signals (like voice) to digital signals. That puts it at the heart of the mobility movement. It also is one of the top suppliers to industrial and automotive market, which means robots, IoT and smart cars.
TXN is at the heart of where the industry is and it continues to grow through smart, far-sighted leadership and a long history of producing great products at reasonable prices.
Bottom Line on TXN Stock
It doesn’t have the brand name exposure of some chip companies, but if you look at the guts of almost any device with a circuit board, you’ll likely to find Texas Instruments chips.
Even after the earnings beat, TXN stock is off nearly 10% in the past 12 months, which isn’t too bad considering the hammering other chipmakers took, such as Nvidia (NASDAQ:NVDA, -35%). This week’s earnings surprise has set the stage for a long-term comeback.
It’s also no surprise that TXN is delivering a respectable 3.26% dividend currently. That yield encourages patience and long-term investing.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.