Shares of Texas Instruments Inc and Verizon Communications Inc have been in a sharp downtrend in recent months, but the sell-off has made neither of these any more attractive to own.
In fact, Michael Landsberg dubbed both a “value trap” in a recent interview with CNBC. He’s the chief investment officer of Landsberg Bennett Private Wealth Management.
Here’s why Landsberg recommends selling TXN and VZ even though both have already tanked significantly over the past three months.
Texas Instruments Inc (NASDAQ: TXN)
Michael Landsberg recommends unloading Texas Instruments stock primarily because it does not offer meaningful exposure to artificial intelligence – but still trades a rich multiple.
“There are better places to be in semi, with exposure to AI that isn’t much more expensive than this,” he argued last week on “Three Stock Lunch”.
Texas Instruments is currently going for about 30 times forward “when earnings aren’t going to grow much.” Landsberg also dubbed the ongoing weakness in TXN warranted as “margins aren’t there.”
Earlier in January, the Nasdaq listed firm reported a year-on-year decline in profit for its fourth financial quarter and issued a disappointing guidance for the future.
Texas Instruments now expects its per-share earnings to fall between 94 cents and $1.16 in Q1. Even the higher end of its range came in below $1.17 that experts had forecast. Still, chief executive Haviv Ilan said in a press release at the time:
“Our cash flow from operations for the trailing 12 months again underscored the strength of our business mode, the quality of our product portfolio and the benefit of 300mm production.”
Shares of the multinational semiconductor company also pay a healthy 2.93% dividend yield at that does make them more attractive for income investors at writing.
Verizon Communications Inc (NYSE: VZ)
Michael Landsberg cautioned against owning Verizon stock on CNBC’s “Three Stock Lunch” due to similar reasons.
The telecommunications giant just doesn’t have the financial strength to justify the premium multiple at which it’s currently trading, he argued, adding “it’s kind of like your grandparents’ dividend stock. I don’t think it’s a name you want to keep.”
Peers, including AT&T, could be better buys than VZ, as Verizon’s net return over the past two decades is roughly zero. Verizon shares were going for $40 in 2007 versus $39.50 at the time of writing.
Michael Landsberg remains bearish on Verizon Communications even though it reported record growth in mobile and broadband subscribers for its recent quarter last week.
The telecom firm came in ahead of Street estimates for both profit and revenue in Q4.
Additionally, Verizon stock offers a lucrative dividend yield of 6.85% at writing that makes them attractive for those interested in setting up a new source of passive income.
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