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Ticker Shock: Why Texas Instruments Shouldn't Be Ignored


Thursday's top stories and stocks with potential to move.

Yesterday in this column, I mentioned my family was home sick and it was probably just a matter of time until I got it. The good news is, I was right. But that bad news is, I was right: My head feels about the size of a melon and my ears feel like they're stuffed with cotton balls.

Asian stocks rose overnight. The Hang Seng and the Nikkei were up 1.05% and 1.95%, respectively. But European stocks were more of a mixed bag earlier this morning. And here in the US, we're currently trading higher.

Here's what I'm focused on besides the rapidly approaching weekend:

Texas Instruments (TXN):
There was some good news that came from the Dallas, Texas-based chipmaker after the bell yesterday. It cranked up its outlook for the third quarter.

According to the release: "The company currently expects its financial results to fall within the following ranges: Revenue: $2.73-$2.87 billion, compared with the prior range of $2.50-$2.80 billion EPS: $0.37-$0.41, compared with the prior range of $0.29-$0.39."

Clearly that's a positive. It's also interesting because the Street is at $0.35.

Some thoughts:

1. We could see the analyst community bump up their estimates, too, as the result of this release. Not a lot, but a smidge. I'm even happier about the fact that it bumped up the outlook for its top line as well.

2. The fact that it's right near its 52-week high is going to draw even more eyes, particularly those of the momentum guys.

3. As I said in a previous article, I think the company could face some crosswinds and it probably won't be all smooth sailing in the near-term. But the good does seem to outweigh the bad. And as I also suggested previously, I'm a long-term bull. This stock is just too hard to ignore and there's just so much upside potential.

Smith & Wesson (SWHC):
To quote Dirty Harry, "Go ahead, make my day."

Did you have a chance to check out the firearm maker's first-quarter numbers?

The company turned in a profit of $0.21. However, it was quick to point out in the release: "Net income included a non-cash, fair-value adjustment to the contingent consideration accrual related to our acquisition of Universal Safety Response ('USR') that increased fully diluted earnings per share by $0.05 in the current fiscal period."

In any case, not too shabby, given the estimate I was seeing was for a dime a share.

A few thoughts:

1. While its bottom line is bound to draw a few eyes, its outlook is worth a gander. In the release, it also said: "Based on current visibility, however, we expect our total company sales for the second quarter will be between $103 million and $105 million, which would be another record revenue quarter." Again, not bad because the estimate I'm seeing is for about $99.8 million.

2. The news should kick the stock price pretty well above the crucial $5 mark.

There could be a decent trade here today. But I'm a bit reluctant to hop in long run. My sense is that with the economy improving, at some point the administration's discussion may turn toward gun control. This could have an adverse impact on firearm sales.

4. I'd rather play the big companies that make the big weapons -- players like Raytheon (RTN) or Boeing (BA).

Yahoo (YHOO):
Fellow Minyan Justin Sharon points out in his article that Bank of America/Merrill bumped up its target price from $17 to $19.

1. I don't see this as a $19 stock, rather a $25 to $30 stock. Remember that this company had been in the doldrums for a pretty long time and I believe lots of retail and institutional folks are just starting to cozy on up to this story.

2. In addition, I think Carol Bartz has a couple of tricks up her sleeve to drive value, too. It really needs to punch through that 52-week high. If that happens there's going to be a lot of believers.

Electronic Arts
The company was downgraded by Goldman from Buy to Neutral.

1. This isn't the end of the world by any stretch. But it is a kick to the teeth. And I have to say, I agree with the move. At right around 18.5 times this year's estimate, I'm not tickled by the opportunity.

2. I'd also want to feel a lot more comfortable with that $1.27 estimate that's out there for next year before pulling the trigger at all. Right now, I don't know if it will hit that number.

3. When it comes down to it, there are better opportunities out there.

Have a great day!
No positions in stocks mentioned.

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