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Bull of the Day: Taiwan Semiconductor Manufacturing Co. (TSM)
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Taiwan Semiconductor Manufacturing Co. (TSM - Free Report) is one of the most straightforward buy-and-hold stocks.
Taiwan Semi is the semiconductor manufacturer, with Nvidia, Apple, and tons of other tech giants all depending on TSMC to physically build the most advanced, complicated, and microscopic components that the entire global economy runs on. The costs and institutional knowledge required to build the most cutting-edge semiconductors create an almost impenetrable moat around Taiwan Semi.
This backdrop is why Taiwan Semi stock has tripled the Zacks Technology sector over the past 20 years.
Taiwan Semi’s growth outlook is stellar since major technological innovations, including artificial intelligence, are fueled by chips Taiwan Semi makes.
TSMC is addressing geopolitical fears by expanding its manufacturing footprint outside of Taiwan. On top of that, TSMC’s valuation is solid, it pays a dividend, and its balance sheet is robust.
TSM shares are trading around 15% below their mid-July highs after finding support at a key long-term moving average mid-week.
TSMC 101
Taiwan Semiconductor Manufacturing Co is better known as Taiwan Semi or TSMC.
Taiwan Semi pioneered the dedicated semiconductor foundry business model that has helped TSM evolve into the most dominant player in the vital industry. TSMC reportedly earned 61% of the semiconductor foundry market share in the fourth quarter of 2023, blowing away second-place Samsung’s 14%.
Taiwan Semi is almost unrivaled, expanding its huge trench around the cutting-edge of chip manufacturing. TSMC is ramping up its industry-leading 3-nanometer technology. Taiwan Semi’s clients include Apple ((AAPL - Free Report) ), Nvidia ((NVDA - Free Report) ), and other tech giants, all of which come to Taiwan Semi to build their most advanced chips.
Image Source: Zacks Investment Research
Shipments of its 3-nanometer chips accounted for 15% of TSMC’s total wafer revenue in the second quarter, while 5-nanometer accounted for 35%, and 7-nanometer grabbed 17%. TSMC said that advanced technologies (defined as 7-nanometer and more advanced) made up 67% of total quarterly wafer revenue.
TSMC is expanding its manufacturing footprint beyond Taiwan to help diversify amid growing geopolitical tensions. The firm opened a plant in Japan earlier this year. TSMC is also investing heavily to build semiconductor factories in the U.S., fueled by Federal government incentives.
TSMC Outlook
TSMC averaged 18% sales growth between FY18 and FY22, including 29% expansion in 2022, before suffering a cyclical downturn (-4%) in 2023. Taiwan Semi grew its Q2 FY24 sales by 33% YoY and 10% sequentially. Taiwan Semi’s gross margin came in at 53.2% last quarter, with an operating margin of 42.5%.
Taiwan Semi boosted its revenue and its earnings outlook when it reported on July 18. “Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies,” CFO Wendell Huang said in prepared Q2 remarks.
Image Source: Zacks Investment Research
TSMC is projected to grow its sales by roughly 23% in both FY24 and FY25 to soar from $69 billion in 2023 to $105 billion next year. Taiwan’s revenue growth is projected to help it boost its adjusted earnings by 23% and 28%, respectively.
TSMC’s upward EPS revisions earn the stock a Zacks Rank #1 (Strong Buy), with its FY25 outlook up around 6% since its release. Taiwan Semi has topped our ESP estimates by an average of 8% in the trailing four quarters.
Performance, Technical Levels, and Valuation
Taiwan Semi stock more than doubled the Zacks Tech sector over the last 10 years, up 720%, while tripling the sector the past two decades—TSM soared 2,300% during that stretch. TSM has climbed 300% in the past five years, and it broke out firmly above its previous highs in May.
Image Source: Zacks Investment Research
TSM shares are up 60% YTD, yet they traded 15% below their mid-July highs and 33% below their average Zacks price target. Taiwan Semi found buyers at its 21-week moving average on Wednesday to help it close not too far below its 50-day.
The recent wave of selling helped cool off Taiwan Semi stock, and any more near-term pullbacks could be used as a chance for investors to scoop up the stock at even lower prices.
Taiwan Semi trades at a 40% discount to its 10-year highs at 20.9X forward 12-month earnings and 20% below the Zacks Tech sector. Meanwhile, Nvidia trades at 36.3X forward earnings, and AAPL trades at 30.2X.
Image Source: Zacks Investment Research
TSM Bottom Line
Taiwan Semiconductor stock is one of the only pure-play chip manufacturers. TSMC is poised to grow for decades since it physically builds the bedrock of all technology, from data centers to AI.
Wall Street is upbeat about TSMC's ability to slowly raise prices since Nvidia and others have almost nowhere else to turn for their chip manufacturing needs, with eight of the 10 brokerage recommendations Zacks has at “Strong Buys.”
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Bull of the Day: Taiwan Semiconductor Manufacturing Co. (TSM)
Taiwan Semiconductor Manufacturing Co. (TSM - Free Report) is one of the most straightforward buy-and-hold stocks.
Taiwan Semi is the semiconductor manufacturer, with Nvidia, Apple, and tons of other tech giants all depending on TSMC to physically build the most advanced, complicated, and microscopic components that the entire global economy runs on. The costs and institutional knowledge required to build the most cutting-edge semiconductors create an almost impenetrable moat around Taiwan Semi.
This backdrop is why Taiwan Semi stock has tripled the Zacks Technology sector over the past 20 years.
Taiwan Semi’s growth outlook is stellar since major technological innovations, including artificial intelligence, are fueled by chips Taiwan Semi makes.
TSMC is addressing geopolitical fears by expanding its manufacturing footprint outside of Taiwan. On top of that, TSMC’s valuation is solid, it pays a dividend, and its balance sheet is robust.
TSM shares are trading around 15% below their mid-July highs after finding support at a key long-term moving average mid-week.
TSMC 101
Taiwan Semiconductor Manufacturing Co is better known as Taiwan Semi or TSMC.
Taiwan Semi pioneered the dedicated semiconductor foundry business model that has helped TSM evolve into the most dominant player in the vital industry. TSMC reportedly earned 61% of the semiconductor foundry market share in the fourth quarter of 2023, blowing away second-place Samsung’s 14%.
Taiwan Semi is almost unrivaled, expanding its huge trench around the cutting-edge of chip manufacturing. TSMC is ramping up its industry-leading 3-nanometer technology. Taiwan Semi’s clients include Apple ((AAPL - Free Report) ), Nvidia ((NVDA - Free Report) ), and other tech giants, all of which come to Taiwan Semi to build their most advanced chips.
Image Source: Zacks Investment Research
Shipments of its 3-nanometer chips accounted for 15% of TSMC’s total wafer revenue in the second quarter, while 5-nanometer accounted for 35%, and 7-nanometer grabbed 17%. TSMC said that advanced technologies (defined as 7-nanometer and more advanced) made up 67% of total quarterly wafer revenue.
TSMC is expanding its manufacturing footprint beyond Taiwan to help diversify amid growing geopolitical tensions. The firm opened a plant in Japan earlier this year. TSMC is also investing heavily to build semiconductor factories in the U.S., fueled by Federal government incentives.
TSMC Outlook
TSMC averaged 18% sales growth between FY18 and FY22, including 29% expansion in 2022, before suffering a cyclical downturn (-4%) in 2023. Taiwan Semi grew its Q2 FY24 sales by 33% YoY and 10% sequentially. Taiwan Semi’s gross margin came in at 53.2% last quarter, with an operating margin of 42.5%.
Taiwan Semi boosted its revenue and its earnings outlook when it reported on July 18. “Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies,” CFO Wendell Huang said in prepared Q2 remarks.
Image Source: Zacks Investment Research
TSMC is projected to grow its sales by roughly 23% in both FY24 and FY25 to soar from $69 billion in 2023 to $105 billion next year. Taiwan’s revenue growth is projected to help it boost its adjusted earnings by 23% and 28%, respectively.
TSMC’s upward EPS revisions earn the stock a Zacks Rank #1 (Strong Buy), with its FY25 outlook up around 6% since its release. Taiwan Semi has topped our ESP estimates by an average of 8% in the trailing four quarters.
Performance, Technical Levels, and Valuation
Taiwan Semi stock more than doubled the Zacks Tech sector over the last 10 years, up 720%, while tripling the sector the past two decades—TSM soared 2,300% during that stretch. TSM has climbed 300% in the past five years, and it broke out firmly above its previous highs in May.
Image Source: Zacks Investment Research
TSM shares are up 60% YTD, yet they traded 15% below their mid-July highs and 33% below their average Zacks price target. Taiwan Semi found buyers at its 21-week moving average on Wednesday to help it close not too far below its 50-day.
The recent wave of selling helped cool off Taiwan Semi stock, and any more near-term pullbacks could be used as a chance for investors to scoop up the stock at even lower prices.
Taiwan Semi trades at a 40% discount to its 10-year highs at 20.9X forward 12-month earnings and 20% below the Zacks Tech sector. Meanwhile, Nvidia trades at 36.3X forward earnings, and AAPL trades at 30.2X.
Image Source: Zacks Investment Research
TSM Bottom Line
Taiwan Semiconductor stock is one of the only pure-play chip manufacturers. TSMC is poised to grow for decades since it physically builds the bedrock of all technology, from data centers to AI.
Wall Street is upbeat about TSMC's ability to slowly raise prices since Nvidia and others have almost nowhere else to turn for their chip manufacturing needs, with eight of the 10 brokerage recommendations Zacks has at “Strong Buys.”