Texas Instruments has a leading share of the fragmented yet lucrative analog chip market. Analog chips are used to convert real-world signals, such as sound and temperature, into digital signals that can be processed. Since analog chips are neither particularly expensive, nor do they require cutting-edge manufacturing techniques, high-quality analog chipmakers tend to retain design wins for the life of the product, yet maintain healthy pricing and strong profitability on such sales over time.
Additionally, Texas Instruments’ size allows the firm to compete across a broader spectrum of industries, without its fortunes tied to a single customer or end market. Texas Instruments’ embedded chip business is a bit more exposed to the automotive and communications infrastructure end markets, but should also see healthy growth over the next few years. The “Internet of Things” is an interesting tailwind for TI, as the company’s chips could be key components in a massive array of new electronics devices with improved connectivity and processing power.
Financial Strength
Revenue in the September quarter was $4.64 billion, up 1% sequentially, up 22% year over year and above the midpoint of guidance of $4.40 billion-$4.76 billion as provided in July. Industrial chip demand was strongest, up 40% year over year, even though sales were down a mid-single-digit percentage sequentially. Automotive revenue was up 20% year over year and up more than 30% from pre-pandemic levels (fourth quarter of 2019). These near-term results still bode well for strong long-term tailwinds for TI, in terms of rising chip content per car and industrial device. Gross margin expanded 70 basis points sequentially to 67.9%, thanks to higher sales levels. In turn, operating margin expanded 130 basis points sequentially to 49.6%.
Texas Instruments is in a modest net debt position, with $6.6 billion of cash on hand versus $6.8 billion of debt as of December 2020. The company’s target is to pay out 100% of free cash flow (less debt repayments) to investors over time. The firm offers a $1.02 quarterly dividend that yields over 2%, and the company intends to issue 40%-60% of its 4-year trailing free cash flow out to investors via dividends. Meanwhile, Texas Instruments continues to make hefty share repurchases (over $2 billion per year in each of the last six years). Nonetheless, we do not believe Texas Instruments will adopt a balance sheet with reckless leverage anytime soon, as the industry is highly cyclical and firms with healthy cash cushions are often able to better handle the inevitable industry downturns.
Bulls Say’s
- Texas Instruments has a leading market share position in several chip segments, such as analog semiconductors and digital signal processors.
- A key element of Texas Instruments’ success has come from its massive global sales staff, which allows the firm to cross-sell its extensive semiconductor product portfolio to existing customers.
- Texas Instruments’ ability to manufacture analog parts on 300-millimeter silicon wafers has provided the company with robust gross margin expansion in recent years, and we anticipate further expansion in the years ahead.
Company Profile
Dallas-based Texas Instruments generates about 95% of its revenue from semiconductors and the remainder from its well-known calculators. Texas Instruments is the world’s largest maker of analog chips, which are used to process real-world signals such as sound and power. Texas Instruments also has a leading market share position in digital signal processors, used in wireless communications, and microcontrollers used in a wide variety of electronics applications.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Production in the September 2021 quarter was higher than in June, with managed saleable coal production up 22%. Narrabri was the sole driver, adding more than one million tonnes more of saleable coal in September from the woeful June quarter’s 0.3 million tonnes.
Coal prices soared in the last quarter, fuelled by strong demand with coal being sought globally for industrial and energy use by governments in COVID-19 economic stimulus projects. On the supply side, production from Australia has yet to recover from the bout of low prices in 2020. According to the Australian Government’s Resources and Energy Quarterly, thermal coal exports from Australia in fiscal 2021 were down about 7% from fiscal 2019 levels and are not expected to fully recover until fiscal 2023.
Financial Strength:
Whitehaven remains substantially undervalued with the market likely underestimating the near-term cash flow generation from this business given the buoyant coal prices.
Whitehaven went into fiscal 2022 with more than AUD 800 million of debt. However, with the buoyant coal prices, about AUD 100 million of debt a month is being repaid, and the company is expected to have net cash in the third quarter. fiscal 2022. Whitehaven favourably received Federal approval for the Vickery Extension Project in September, with production expected from around 2025.
Company Profile:
Whitehaven Coal is a large Australian independent thermal and semisoft metallurgical coal miner with several mines in the Gunnedah Basin, New South Wales. It also owns the large undeveloped Vickery and Winchester South deposits in New South Wales and Queensland respectively. Coal is railed to the port of Newcastle for export to Asian customers. Equity salable coal production expanded from 10 million tonnes in fiscal 2014 to about 15 million tonnes in fiscal 2021, largely due to Maules Creek. The Maules Creek and Narrabri mines should be the key driver of an expansion in equity coal production to approach 19 million tonnes from fiscal 2023. Development of the Vickery deposit could see approximately 8 million tonnes of additional equity production from around 2025.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Texas Instruments has a leading share of the fragmented yet lucrative analog chip market. Analog chips are used to convert real-world signals, such as sound and temperature, into digital signals that can be processed. Since analog chips are neither particularly expensive, nor do they require cutting-edge manufacturing techniques, high-quality analog chipmakers tend to retain design wins for the life of the product, yet maintain healthy pricing and strong profitability on such sales over time.
Additionally, Texas Instruments’ size allows the firm to compete across a broader spectrum of industries, without its fortunes tied to a single customer or end market. Texas Instruments’ embedded chip business is a bit more exposed to the automotive and communications infrastructure end markets, but should also see healthy growth over the next few years. The “Internet of Things” is an interesting tailwind for TI, as the company’s chips could be key components in a massive array of new electronics devices with improved connectivity and processing power.
Financial Strength
Revenue in the September quarter was $4.64 billion, up 1% sequentially, up 22% year over year and above the midpoint of guidance of $4.40 billion-$4.76 billion as provided in July. Industrial chip demand was strongest, up 40% year over year, even though sales were down a mid-single-digit percentage sequentially. Automotive revenue was up 20% year over year and up more than 30% from pre-pandemic levels (fourth quarter of 2019). These near-term results still bode well for strong long-term tailwinds for TI, in terms of rising chip content per car and industrial device. Gross margin expanded 70 basis points sequentially to 67.9%, thanks to higher sales levels. In turn, operating margin expanded 130 basis points sequentially to 49.6%.
Texas Instruments is in a modest net debt position, with $6.6 billion of cash on hand versus $6.8 billion of debt as of December 2020. The company’s target is to pay out 100% of free cash flow (less debt repayments) to investors over time. The firm offers a $1.02 quarterly dividend that yields over 2%, and the company intends to issue 40%-60% of its 4-year trailing free cash flow out to investors via dividends. Meanwhile, Texas Instruments continues to make hefty share repurchases (over $2 billion per year in each of the last six years). Nonetheless, we do not believe Texas Instruments will adopt a balance sheet with reckless leverage anytime soon, as the industry is highly cyclical and firms with healthy cash cushions are often able to better handle the inevitable industry downturns.
Bulls Say’s
- Texas Instruments has a leading market share position in several chip segments, such as analog semiconductors and digital signal processors.
- A key element of Texas Instruments’ success has come from its massive global sales staff, which allows the firm to cross-sell its extensive semiconductor product portfolio to existing customers.
- Texas Instruments’ ability to manufacture analog parts on 300-millimeter silicon wafers has provided the company with robust gross margin expansion in recent years, and we anticipate further expansion in the years ahead.
Company Profile
Dallas-based Texas Instruments generates about 95% of its revenue from semiconductors and the remainder from its well-known calculators. Texas Instruments is the world’s largest maker of analog chips, which are used to process real-world signals such as sound and power. Texas Instruments also has a leading market share position in digital signal processors, used in wireless communications, and microcontrollers used in a wide variety of electronics applications.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
It is believed that lower subscriber growth reflects not only saturation in its largest markets but strong competition in the regions with the most potential growth remaining, including Latin America and India.
Netflix posted 4.4 million net subscriber adds during the quarter, up only 2% sequentially and up 9% from 195 million a year ago. Growth was slower in the U.S., with fewer than 100,000 net additions–only the third time below that mark since the start of 2012. Latin America has also seen anemic growth in 2021, with only 330,000 net adds in the quarter and only 1.45 million year to date, which is well below the same periods in 2019 (3.3 million) and 2018 (4.4 million).
Revenue of $7.5 billion, up 16%.U.S. revenue improved by 11% year over year, largely due to the price hike in 2020 as the subscriber base only increased 1% versus last year. Average revenue per customer for the region was up 10% versus a year ago to $14.68, implying that most customers are on the standard HD plan at $14 with a growing share on the 4K plan at $18. The 4K plan remains the most expensive streaming option in the U.S. marketplace right now, potentially capping Netflix’s ability to continually raise prices as subscriber growth dwindles.
Europe, Middle East and Africa, Netflix’s second-largest region by revenue and subscribers, posted continued strong revenue growth of 21% as the region continues to benefit from price hikes along with a large influx of new subscribers. The region now has over 70 million subscribers with almost 19 million net adds over the last seven quarters, 5 million more than any other region.
Asia-Pacific, Netflix’s supposed long-term growth engine, increased revenue year over year by an impressive 31% in the quarter but ARPU remained under $10 and actually declined sequentially. It is expected that ARPU will decline going forward as the firm rolls out low-price plans in more countries across the region. These lower priced plans will be necessary to compete with both Amazon and Disney in emerging markets like India and Indonesia.
Company Profile
Netflix’s primary business is a streaming video on demand service now available in almost every country worldwide except China. Netflix delivers original and third-party digital video content to PCs, Internet-connected TVs, and consumer electronic devices, including tablets, video game consoles, Apple TV, Roku, and Chromecast. In 2011, Netflix introduced DVD-only plans and separated the combined streaming and DVD plans, making it necessary for subscribers who want both to have separate plans.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
