Last week was a disaster for TXN, as its Q4 results and Q1 guidance fell short of expectations. Let's delve into all the details and answer the question above!
Many thanks for this. Is there any way of working out what recovered earnings are? I.e. is it peak multiple on trough earnings. From what I can read, it doesn't sound like the end prize has changed or they've lost any competitive positioning - those downgrades can reverse pretty quickly if cycle recovers.
We are on a through multiple, indeed. That in itself is not a bad thing. Multiples change through the cycles of these semiconductor businesses. The problem here is that TXN shares haven't been corrected sufficiently. So, even as we assume a premium long-term multiple with optimistic earnings projections, there isn't enough to warrant current multiples.
So, yes, a recovery will be coming in the years ahead, but this needs to be significantly ahead of current projections to justify current prices, which makes me cautious.
Businesses in cyclical industries demand a longer-term perspective when evaluating their worth. Typically, these are commodity-driven sectors—whether or not semiconductors are truly "commodities" is up for debate, but they're undeniably cyclical. The opportunity for long-term wealth lies in identifying great businesses and entering at the trough of the cycle. Remember, though, it’s crucial to be clear on *why* you’re buying. Companies in cyclical sectors PAY YOU to take on the volatility. In simple terms: you invest in them because they compensate you for enduring the ups and downs of the market cycle.
Absolutely! I fully agree. That is why I don't at all mind owning a significant number of cyclical semiconductor stocks. Long-term, these businesses deliver excellent returns.
The issue here, for me, is that TXN hasn't corrected enough to make current levels attractive. Yes, I am happy to hold shares at more attractive entry prices, and I am not saying anyone should sell, necessarily, but I am also not at all compelled to buy. The company needs to be able to deliver enough growth to allow for these kind of multiples, and in the medium-term, it won't, making it potentially dead money.
For TXN, we have passed its share price through, and shares have quickly rebounded based on expectations that ended up too optimistic.
Many thanks for this. Is there any way of working out what recovered earnings are? I.e. is it peak multiple on trough earnings. From what I can read, it doesn't sound like the end prize has changed or they've lost any competitive positioning - those downgrades can reverse pretty quickly if cycle recovers.
We are on a through multiple, indeed. That in itself is not a bad thing. Multiples change through the cycles of these semiconductor businesses. The problem here is that TXN shares haven't been corrected sufficiently. So, even as we assume a premium long-term multiple with optimistic earnings projections, there isn't enough to warrant current multiples.
So, yes, a recovery will be coming in the years ahead, but this needs to be significantly ahead of current projections to justify current prices, which makes me cautious.
Businesses in cyclical industries demand a longer-term perspective when evaluating their worth. Typically, these are commodity-driven sectors—whether or not semiconductors are truly "commodities" is up for debate, but they're undeniably cyclical. The opportunity for long-term wealth lies in identifying great businesses and entering at the trough of the cycle. Remember, though, it’s crucial to be clear on *why* you’re buying. Companies in cyclical sectors PAY YOU to take on the volatility. In simple terms: you invest in them because they compensate you for enduring the ups and downs of the market cycle.
Absolutely! I fully agree. That is why I don't at all mind owning a significant number of cyclical semiconductor stocks. Long-term, these businesses deliver excellent returns.
The issue here, for me, is that TXN hasn't corrected enough to make current levels attractive. Yes, I am happy to hold shares at more attractive entry prices, and I am not saying anyone should sell, necessarily, but I am also not at all compelled to buy. The company needs to be able to deliver enough growth to allow for these kind of multiples, and in the medium-term, it won't, making it potentially dead money.
For TXN, we have passed its share price through, and shares have quickly rebounded based on expectations that ended up too optimistic.