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Taiwan Semiconductor (TSM) Gains 64.6% YTD: Should You Buy Now?
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Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) has seen its stock price climb 64.6% in the year-to-date period, outperforming the broader Zacks Computer & Technology sector’s growth of 25.8% and the S&P 500 index’s rise of 17.6%.
The TSM stock is also currently trading above its 50-day moving average, indicating a bullish trend.
The company is benefiting from its strong positioning in the semiconductor manufacturing field on the back of its scale and capacity, particularly for advanced technologies. In 2023, it produced 28% of the world’s semiconductors, which is noteworthy.
TSM Trades Above 50-Day SMA
Image Source: Zacks Investment Research
Taiwan Semiconductor’s strength in wafer fabrication processes is the key catalyst. Its solid momentum among customers, increasing design wins, and strong presence in the domestic and international markets are major positives.
Also, TSM’s expanding network of semiconductor facilities, which currently includes one 150mm wafer fab, six 200mm wafer fabs, six 300mm wafer fabs and five advanced backend fabs, bode well for its near and long-term prospects.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Strong Advanced Technologies Aid Prospects
The semiconductor industry has been staging a solid rebound on growing demand and the optimism surrounding artificial intelligence (AI). This has been a positive for wafer fab equipment spending, which, in turn, bodes well for Taiwan Semiconductor.
The growing proliferation of AI, especially generative AI, has created immense opportunities for chipmakers. The solid adoption of cloud, blockchain, Internet of Things (IoT) and metaverse has been a boon for the semiconductor industry.
Owing to these factors, Taiwan Semiconductor is experiencing solid demand for its advanced technologies, such as 3-nanometer (nm) and 5nm. The growing adoption of its multi-project wafer processing service, which allows customers to reduce mask costs, is driving its customer momentum.
The company’s growing efforts to ramp up the production of 3nm and development of 2nm is a plus. Also, strength across its 7nm, 16nm and 28nm technologies are contributing well to its top-line growth.
In second-quarter 2024, 3nm, 5nm, 7nm, 16nm and 28nm accounted for 15%, 35%, 17%, 9% and 8% of the company’s wafer revenues, respectively.
Taiwan Semiconductor is constantly witnessing strong momentum across high-performance computing, smartphone, automotive, IoT and digital consumer electronics applications on the back of robust Fin Field-Effect Transistor (FinFET), which is powered by its advanced technologies. In the June-end quarter, these applications contributed 52%, 33%, 6%, 5% and 2% to the net revenues, respectively.
Solid Customer Momentum Drives Growth
Taiwan Semiconductor enjoys a strong customer momentum on the back of its powerful solutions.
The company’s customer base includes many semiconductor bigwigs, such as NVIDIA (NVDA - Free Report) , Advanced Micro Devices, Amazon Web Services, Broadcom (AVGO - Free Report) , Infineon Technologies, Intel (INTC - Free Report) , MediaTek, NXP Semiconductors, Qualcomm and Sony.
The fact that TSM is one of the largest manufacturers of NVIDIA’s chipsets is noteworthy.
In 2023, the company’s 10 large customers contributed 70% to the total revenues. The largest customer among them contributed 25% alone, whereas the second-largest customer accounted for 11% of the net revenues in the same year.
Growing relationships with these behemoths are expected to continue driving top-line growth.
TSM’s Strong Outlook
For third-quarter 2024, Taiwan Semiconductor expects the solid adoption of AI and smartphones to boost the demand for its leading-edge process technologies. It projects revenues between $22.4 billion and $23.2 billion.
The company also expects above 20% growth in 2024 revenues on rising demand for high-end chips used in AI applications.
The Zacks Consensus Estimate for third-quarter and 2024 revenues is pegged at $22.55 billion and $85.12 billion, indicating year-over-year growth of 30.5% and 22.8%, respectively.
The consensus mark for third-quarter 2024 earnings is pegged at $1.62 per share, suggesting year-over-year growth of 25.6%. The estimate has been revised upward by 3.8% in the past 30 days.
The consensus mark for 2024 earnings is pegged at $6.16 per share, indicating year-over-year growth of 18.9%. The estimate has been revised upward by 0.5% in the past 30 days.
Image Source: Zacks Investment Research
Conclusion
TSM’s current valuation raises concerns. Its valuation looks stretched at the current level, as reflected by the Value Style Score of C.
Rising macroeconomic uncertainties, inflationary pressure and geopolitical tensions, especially between the United States and China, are major concerns for the company.
Nevertheless, Taiwan Semiconductor’s strength in chip manufacturing, significant position in the semiconductor industry, robust portfolio of technologies, solid customer momentum and strong network of semiconductor fabs present an attractive investment opportunity for growth-seeking investors as reflected by its Growth Style Score of B.
Image: Bigstock
Taiwan Semiconductor (TSM) Gains 64.6% YTD: Should You Buy Now?
Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) has seen its stock price climb 64.6% in the year-to-date period, outperforming the broader Zacks Computer & Technology sector’s growth of 25.8% and the S&P 500 index’s rise of 17.6%.
The TSM stock is also currently trading above its 50-day moving average, indicating a bullish trend.
The company is benefiting from its strong positioning in the semiconductor manufacturing field on the back of its scale and capacity, particularly for advanced technologies. In 2023, it produced 28% of the world’s semiconductors, which is noteworthy.
TSM Trades Above 50-Day SMA
Image Source: Zacks Investment Research
Taiwan Semiconductor’s strength in wafer fabrication processes is the key catalyst. Its solid momentum among customers, increasing design wins, and strong presence in the domestic and international markets are major positives.
Also, TSM’s expanding network of semiconductor facilities, which currently includes one 150mm wafer fab, six 200mm wafer fabs, six 300mm wafer fabs and five advanced backend fabs, bode well for its near and long-term prospects.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Strong Advanced Technologies Aid Prospects
The semiconductor industry has been staging a solid rebound on growing demand and the optimism surrounding artificial intelligence (AI). This has been a positive for wafer fab equipment spending, which, in turn, bodes well for Taiwan Semiconductor.
The growing proliferation of AI, especially generative AI, has created immense opportunities for chipmakers. The solid adoption of cloud, blockchain, Internet of Things (IoT) and metaverse has been a boon for the semiconductor industry.
Owing to these factors, Taiwan Semiconductor is experiencing solid demand for its advanced technologies, such as 3-nanometer (nm) and 5nm. The growing adoption of its multi-project wafer processing service, which allows customers to reduce mask costs, is driving its customer momentum.
The company’s growing efforts to ramp up the production of 3nm and development of 2nm is a plus. Also, strength across its 7nm, 16nm and 28nm technologies are contributing well to its top-line growth.
In second-quarter 2024, 3nm, 5nm, 7nm, 16nm and 28nm accounted for 15%, 35%, 17%, 9% and 8% of the company’s wafer revenues, respectively.
Taiwan Semiconductor is constantly witnessing strong momentum across high-performance computing, smartphone, automotive, IoT and digital consumer electronics applications on the back of robust Fin Field-Effect Transistor (FinFET), which is powered by its advanced technologies. In the June-end quarter, these applications contributed 52%, 33%, 6%, 5% and 2% to the net revenues, respectively.
Solid Customer Momentum Drives Growth
Taiwan Semiconductor enjoys a strong customer momentum on the back of its powerful solutions.
The company’s customer base includes many semiconductor bigwigs, such as NVIDIA (NVDA - Free Report) , Advanced Micro Devices, Amazon Web Services, Broadcom (AVGO - Free Report) , Infineon Technologies, Intel (INTC - Free Report) , MediaTek, NXP Semiconductors, Qualcomm and Sony.
The fact that TSM is one of the largest manufacturers of NVIDIA’s chipsets is noteworthy.
In 2023, the company’s 10 large customers contributed 70% to the total revenues. The largest customer among them contributed 25% alone, whereas the second-largest customer accounted for 11% of the net revenues in the same year.
Growing relationships with these behemoths are expected to continue driving top-line growth.
TSM’s Strong Outlook
For third-quarter 2024, Taiwan Semiconductor expects the solid adoption of AI and smartphones to boost the demand for its leading-edge process technologies. It projects revenues between $22.4 billion and $23.2 billion.
The company also expects above 20% growth in 2024 revenues on rising demand for high-end chips used in AI applications.
The Zacks Consensus Estimate for third-quarter and 2024 revenues is pegged at $22.55 billion and $85.12 billion, indicating year-over-year growth of 30.5% and 22.8%, respectively.
The consensus mark for third-quarter 2024 earnings is pegged at $1.62 per share, suggesting year-over-year growth of 25.6%. The estimate has been revised upward by 3.8% in the past 30 days.
The consensus mark for 2024 earnings is pegged at $6.16 per share, indicating year-over-year growth of 18.9%. The estimate has been revised upward by 0.5% in the past 30 days.
Image Source: Zacks Investment Research
Conclusion
TSM’s current valuation raises concerns. Its valuation looks stretched at the current level, as reflected by the Value Style Score of C.
Rising macroeconomic uncertainties, inflationary pressure and geopolitical tensions, especially between the United States and China, are major concerns for the company.
Nevertheless, Taiwan Semiconductor’s strength in chip manufacturing, significant position in the semiconductor industry, robust portfolio of technologies, solid customer momentum and strong network of semiconductor fabs present an attractive investment opportunity for growth-seeking investors as reflected by its Growth Style Score of B.
Taiwan Semiconductor currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.