Robin, the consensus estimate of next year's earning on TXN has been declining continuously, by the time the first quarter of next year is upon us, I would expect this consensus to decline further, maybe to just under $1.50 (it is currently $1.57 (down from $1.64 two months ago). Their customers are mostly in the communication and telephony business, and there have been constraints on capital availability in that space, thus, there is a possibility that the telecom infrastructure build-up may slow down, negatively impacting TXN.
Now, TXN, like INTC, is a well capitalized company and operates in one of the future growth segments of the market, but if you accept the tenet that the first quarter of next year will be a disaster for many chip companies, then you should be careful.
If you are a short term player (and I mean very short like from sometime in the next two weeks to the first or second week in January), then buying TXN here just above its October 21 low of $35 (it closed at $38 and traded as low as $36 and change Friday) could lead to a short term profit to about $41/$43 or, IMHO. I would consider this "dangerous", and surely, if you were to do that, you should have, IMHO a very close stop loss at just under the October's lows.
Medium term, (to the middle of next year), I expect TXN to suffer with the rest of the chips business, and would not be surprised to see it selling as low as 2.5 to 3 times BV, or about $20 to $25 or so. That will be a bear market PE of 13 to about 17. Note that INTC, the undisputed leader in this "space" just broke to new lows Friday and is selling at a PE of 20 only. LSI is selling at a PE of 10 times next year earnings, and SSTI at close to 5 times the expected earnings next year, just as examples of the type of values a bear market creates.
Zeev
irrevolute.iuma.com |
