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Texas Instruments might have concerned some investors when it estimated its first-quarter earnings would come in just below Wall Street forecasts. But there are reasons to believe that there might be good times ahead for the world's largest manufacturer of chips for mobile phones.

On Tuesday, Texas Instruments (nyse: TXN - news - people ) received a boost when Bear Stearns analyst Gurinder Kalra upgraded his rating on the stock to "outperform" from "peer perform."

Kalra told his clients that the company's wireless revenues will bottom in the first quarter.

Further, he noted that pricing pressures on its wireless business should moderate by the second half of the year, due to improved demand for high-end cell phones in the second half of the year, in part driven by replacement cycle in emerging markets. Meanwhile, makers of consumer electronics and other devices that use TI's analog chips, are expect to replenish their inventories and thus increase their semiconductor orders.

Kalra wrote, "While we believe that a bottom in the company's analog business is already priced into the stock, we believe that a bottom and subsequent pick-up on the wireless side is not priced in and inventory rebuilding by its analog distributors will also contribute to the next leg up."

On the analog side, the analyst argued that the company's distributors are on the verge of starting an inventory replenishment cycle, in part due to the broad based improvement in analog order rates.

Kalra also pointed that, in his opinion, Wall Street is currently under-estimating the company's revenue opportunity at Motorola's third-generation mobile phones platforms for 2008 and beyond. He raised his 2007 EPS estimate to $1.65, up from $1.48 and increased 2008 EPS estimate to $1.90, up from $1.71.

On Tuesday, TI shares finished up 1.5%, or 45 cents, at $31.35.

Back on Jan. 22, TI told investors that its fourth-quarter earnings climbed 2%. The company raked in $668 million, or 45 cents per share, versus $655 million, or 40 cents per share, for the similar period a year before.

Revenue rose 4%, to $3.46 billion.

Looking ahead, TI expects earnings in the first quarter to be in the range of 28 cents to 34 cents per share on sales of $3.01 billion. That undershoots the Wall Street prediction of 35 cents for earnings.

In March, the company will issue a mid-quarter report.

The Associated Press contributed to this article.

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