Texas Instruments Stock Is Tanking. Guidance Fell Short.

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Texas Instruments provided a revenue forecast for the June quarter below expectations, citing lower demand in China. Its shares were falling in after-hours trading.

The semiconductor company reported earnings per share of $2.35, compared with Wall Street’s consensus estimate of $2.18, according to FactSet. Revenue came in at $4.9 billion which was above with analysts’ expectations of $4.74 billion. But the big news is the guidance. Texas Instruments gave a revenue-forecast range for the current quarter of $4.2 billion to $4.8 billion—below the consensus estimate for revenue of $4.9 billion.

The chip maker sells the basic building-block chips that go into products in nearly every sector of the economy from autos and industrials to consumer electronics. Because of the broad-based nature of the company’s more-than-100,000 customers, investors consider the company to be an early bellwether for the technology industry, and the economy.

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Texas Instruments (ticker:

TXN

) shares were down 4.4%, at $161, after initially falling as much as 7% following the release.

On the conference call, the company’s management said they lowered guidance due to effects of Covid-19 restrictions in China, which was shutting down hundreds of factories. As a result, Texas Instruments’ customers aren’t able to accept delivery of their parts. Executives said there is a high degree of uncertainty when operations will go back to normal in the Asian country.

Analysts were already warning their clients Texas Instruments’ business momentum may begin to fade. On Monday, Morgan Stanley analyst Joseph Moore reiterated his Underweight rating and lowered his price target on Texas Instruments to $181 from $198. He wrote in a note to clients that the stock’s higher valuation will make it “more challenging” for the shares to do well as the fundamental business outlook for next year deteriorates.

Last week, Oppenheimer analyst Rick Schafer reaffirmed his Outperform rating and $220 target for the chip company’s shares based on its strong long-term industry position. However, Schafer admitted his industry checks show the demand in the computer, smartphone, and television end-markets was currently softening.

Write to Tae Kim at [email protected]