The outlook for Texas Instruments isn’t looking great, according to Bernstein. Analyst Stacy Rasgon downgraded shares to underperform from market perform. He maintained his price target of $145, which implies 15% downside from Tuesday’s close. Rasgon cited concerns around the company’s long-term strategy for the downgrade, which consists of greater in-house chip production. While the strategy is intended for long-term production and margins sustainability, it is also capital intensive. The company is also structurally increasing the amount of inventory on its books, the analyst said. “We wish we could all have a 15-year investment horizon,” Rasgon said in a Wednesday note. “We have the utmost respect for Texas Instruments, who has been vocal, and 100% transparent, about their capex and inventory plans going forward as they structurally raise spending to build out capacity to support revenue growth over the next 10-15 years.” “However, Street models still do not appear to contemplate the consequences of TXN’s plans, and gross margin expectations appear far too high to us; it seems highly likely to us that gross margins are headed toward the 60% level in short order (or worse) well below current expectations,” he added. The analyst also said there is further near-term tactical risk ahead for the stock, due to Wall Street overestimating fourth-quarter revenue and 2024 numbers. He added shares are already trading at an expensive level and, according to his estimates, is trading more than 30 times above its 2025 free cash flow estimates. “We aren’t suggesting TXN’s strategy is ‘wrong’ or ‘bad,’ they just have a longer investment horizon than most other companies. However, this horizon is also likely longer than many investors have as well,” said Rasgon. “We won’t knock them for it, but do believe it is likely to lead to structural underperformance as it rolls out.” Shares fell 2% during premarket trading Wednesday. The stock is up just 3.3% in 2023, far underperforming the S & P 500’s 17.1% rise. TXN YTD mountain TXN in 2023 —CNBC’s Michael Bloom contributed to this report.