Freedom: Texas Instruments options offer 48.3% upside potential

Freedom Broker analysts have recommended buying a call option on Texas Instruments (TXN) shares. Experts expect a continued recovery in semiconductor demand and growth in the company’s free cash flow. The option entry price is $20.90, the target price is $31, implying potential returns of about 48.3% over one to three weeks.

Texas Instruments is a leader in semiconductor development

Texas Instruments is a global manufacturer of analog chips and processors for embedded systems. The company’s products are used in industrial equipment, automobiles, data centers, personal electronics, and telecommunications infrastructure.

Demand recovery supports the investment idea

According to Freedom Broker analysts, Texas Instruments may continue to be re-rated thanks to a simultaneous recovery in industrial and automotive demand, growth in the data-center segment, and improving free cash flow. An additional effect is expected as new production capacity designed to manufacture chips on 300-mm wafers ramps up.

The investment idea предполагает purchasing a TXN call option with a strike price of $260 and an expiration date of November 20, 2026. A call option gives the buyer the right to purchase shares at a pre-set price. The option premium at entry is $20.90, with a target of $31.

Potential profit reaches $10.10 per share, or $1 010 per standard options contract corresponding to 100 shares. Expected returns are about 48.3%, and the recommended holding period is примерно one to three weeks.

Texas Instruments revenue rose 23%

Texas Instruments’ financial results confirm the business recovery: in Q2 2026, revenue increased 23% year over year and 13% sequentially, to $5,463 billion. Growth was broad-based and covered the industrial and automotive segments as well as the data-center business.

Operating profit rose 48%, to $2,310 billion, and net profit increased 53%, to $1,980 billion. Diluted earnings per share increased 52%, from $1.41 to $2.14. The figure included an additional positive impact of $0.05 per share that was not included in the company’s initial guidance.

In the largest Analog segment, revenue climbed 26%, to $4,365 billion, and operating profit rose 50%, to $1,992 billion. Embedded Processing segment revenue, which produces processors for embedded systems, grew 16%, to $788 million. Its operating profit nearly doubled—from $85 million to $168 million.

Free cash flow topped $6.5 billion

Analysts cite a sharp improvement in cash generation as one of the key arguments for the idea. Over 12 months, Texas Instruments’ operating cash flow increased 35%, from $6,439 billion to $8,667 billion.

Free cash flow increased by 271%—from $1,763 billion to $6,534 billion. Its share of revenue reached 33.6% versus 10.6% a year earlier. Free cash flow shows how much cash a company has left after funding operating activities and capital expenditures. Texas Instruments’ calculation also includes proceeds under the U.S. CHIPS Act.

Capital expenditures over the past 12 months declined from $4,936 billion to $3,312 billion. In Q2, they totaled $514 million versus $1,305 billion a year earlier. The reduction in investment after several years of active fab construction frees up more cash and becomes one of the key drivers of the free cash flow recovery.

Over the past 12 months, the company allocated $3.9 billion to R&D, sales, and administrative expenses, and returned $5,819 billion to shareholders. Of this amount, $5,112 billion was paid in dividends and $707 million went to share buybacks.

Texas Instruments’ Q3 outlook

In Q3, management at Texas Instruments expects revenue in the range of $5.65–6.15 billion and earnings of $2.23 to $2.57 per share. Confirmation of a recovery in industrial activity and automotive demand could support the stock in the coming weeks.

Another factor for the idea could be softer expectations regarding monetary policy. Interest-rate cuts typically increase the appeal of technology stocks because they raise the present value of their expected future cash flows.

Not an individual investment recommendation.