The Street Sours On Chips, But TXN Worth A Look

By Glenn Curtis | November 25, 2009 AAA

There are a few reasons to be skeptical about the near-term for some of the larger-name technology stocks. For one, they have performed quite well over the last year and it stands to reason that the space may be ready for a bit of a breather. In addition, this past week Bank of America Merrill Lynch downgraded several high profile companies which included, among others, Intel (Nasdaq:INTC), Texas Instruments (NYSE:TXN) and Marvel (NYSE:MVL). However, the downgrades could present an opportunity.

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Why TXN Looks Like a Chip Worth a Dip
There is little doubt that shares of Texas Instruments have faired very well. But it can go even higher from the current $25.13. The company generates big profits for investors, and remains a top player in the chip arena. After all, its products are used in devices like cell phones and other electronics and demand looks like it will rise in time. Also, the company had more than $2.8 billion in cash, equivalents and short-term investments on September 30, 2009, and that gives it flexibility to survive these difficult times and ultimately grow.

Some fund managers may want to climb aboard as the year comes to an end to show their investors that they have a position in this winner. Also, the company has handily chipped past EPS expectations in recent quarters and it can do so again, in the December quarter.

Others Can Compute, Too
I have long been a bull on Intel and think that years from now history will show that this would have been a great place to become involved. The company seems to be far superior to its number one competitor AMD Corporation (NYSE:AMD).

The Bottom Line
Although some may be sour on technology companies and chip stocks on the heels of the Bank of America Merrill Lynch report, it may create an opportunity, and Texas Instruments' stock could move higher. Fund managers will be keen on chasing this winner and adding it to their portfolio as the year comes to a close. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)

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