Texas Instruments downgraded as Oppenheimer sees sustained margin pressure

Oppenheimer analysts downgraded shares of Texas Instruments (NASDAQ:) to Perform from Outperform in a note to clients Wednesday, removing its price target for the stock.

In their note previewing the company’s Q3 earnings release, the analysts said TXN will release its results on October 24, with their firm expecting an in-line print and guidance.

“TXN’s mgmt. team is proven and respected with a long-term (10-year) strategic vision. We see current cycle of heavy capacity investment ultimately strengthening TXN’s position as a low-cost, domestic manufacturer of analog components,” the analysts wrote.

“We like TXN’s focus/exposure to long-life industrial/auto/comms (~72% sales). In the near/medium term we see sustained margin pressure as mgmt. invests in capacity; GM pressured for next few yrs by combination of under-utilization, increased depreciation and aggressive commodity PMIC pricing in China (~20% sales),” they added.

The analysts also say they believe that TXN’s battle of attrition with smaller suppliers in China could persist for the foreseeable future.