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TSM Stock Soars 89.8% in a Year: Is it the Right Time to Invest?
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Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) shares have surged 89.8% in the past year, outperforming the broader Zacks Computer and Technology sector’s 32.6% growth and the S&P 500’s 26.2% rally in the said time frame.
Such an impressive gain naturally leads investors to wonder whether Taiwan Semiconductor is still a compelling buy or if it is time to lock in profits.
The company has been benefiting from its scale and capacity, particularly for advanced technologies, which are constantly bolstering its footprint in the semiconductor manufacturing field.
One-Year Price Chart
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.
TSM Stock Rides on AI Boom
Taiwan Semiconductor’s strong positioning in the semiconductor industry, which is on the recovery path, owing to the growing proliferation of Artificial Intelligence (AI) and Generative AI, gives a strong hope that its robust advanced technologies will drive the stock further.
Semiconductors or chips — those necessary for AI developments — are in high demand from tech giants. The solid uptake of the Internet of Things (IoT), blockchain and cloud computing solutions is fueling demand for semiconductors.
Thanks to these favorable industry trends, Taiwan Semiconductor is experiencing solid demand for its advanced technologies, such as 3-nanometer (nm) and 5nm. Its strength in its other advanced technologies, such as 7nm, 16nm and 28nm, is another positive.
In the second quarter of 2024, 3nm, 5nm, 7nm, 16nm and 28nm accounted for 15%, 35%, 17%, 9% and 8% of the company’s wafer revenues, respectively.
Against this backdrop, TSM’s growing efforts to ramp up the production of 3nm are a plus. It is also making strides in the development of 2nm, which is capable of addressing the growing need for energy-efficient computing solutions and almost all AI innovators. This technology is designed to deliver a full node performance and power benefit, with 10-15% speed improvement at the same power, or 25-30% power improvement at the same speed, and more than 15% chip density increase.
Its 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, bodes well for its production ramp goals.
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.
The growing adoption of the company’s multi-project wafer processing service, which allows customers to reduce mask costs, is driving its customer momentum further.
Solid Customer Momentum Drives TSM’s 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.
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 due to rising demand for high-end chips used in AI applications.
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $22.72 billion, indicating year-over-year growth of 31.5%.
The consensus mark for third-quarter 2024 earnings is pegged at $1.74 per share, suggesting year-over-year growth of 34.9%. The estimate has been revised upward by 1.2% in the past 30 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $85.62 billion, indicating year-over-year growth of 23.6%.
The consensus mark for 2024 earnings is pegged at $6.45 per share, indicating year-over-year growth of 24.5%. The estimate has been revised upward by 2.2% in the past 60 days.
Image Source: Zacks Investment Research
TSM Offers Attractive Valuation
TSM stock is currently trading at a discount with a forward 12-month P/E multiple of 21.57X, lower than the sector’s average of 25.94X. This reflects a good entry point for the investors.
Image Source: Zacks Investment Research
Conclusion
Investors considering Taiwan Semiconductor should weigh its robust technological foundation and strong positioning in the promising semiconductor industry. Its solid customer momentum and strong network of semiconductor fabs present a lucrative opportunity for investors to add the TSM stock to their portfolio.
Image: Bigstock
TSM Stock Soars 89.8% in a Year: Is it the Right Time to Invest?
Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) shares have surged 89.8% in the past year, outperforming the broader Zacks Computer and Technology sector’s 32.6% growth and the S&P 500’s 26.2% rally in the said time frame.
Such an impressive gain naturally leads investors to wonder whether Taiwan Semiconductor is still a compelling buy or if it is time to lock in profits.
The company has been benefiting from its scale and capacity, particularly for advanced technologies, which are constantly bolstering its footprint in the semiconductor manufacturing field.
One-Year Price Chart
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.
TSM Stock Rides on AI Boom
Taiwan Semiconductor’s strong positioning in the semiconductor industry, which is on the recovery path, owing to the growing proliferation of Artificial Intelligence (AI) and Generative AI, gives a strong hope that its robust advanced technologies will drive the stock further.
Semiconductors or chips — those necessary for AI developments — are in high demand from tech giants. The solid uptake of the Internet of Things (IoT), blockchain and cloud computing solutions is fueling demand for semiconductors.
Thanks to these favorable industry trends, Taiwan Semiconductor is experiencing solid demand for its advanced technologies, such as 3-nanometer (nm) and 5nm. Its strength in its other advanced technologies, such as 7nm, 16nm and 28nm, is another positive.
In the second quarter of 2024, 3nm, 5nm, 7nm, 16nm and 28nm accounted for 15%, 35%, 17%, 9% and 8% of the company’s wafer revenues, respectively.
Against this backdrop, TSM’s growing efforts to ramp up the production of 3nm are a plus. It is also making strides in the development of 2nm, which is capable of addressing the growing need for energy-efficient computing solutions and almost all AI innovators. This technology is designed to deliver a full node performance and power benefit, with 10-15% speed improvement at the same power, or 25-30% power improvement at the same speed, and more than 15% chip density increase.
Its 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, bodes well for its production ramp goals.
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.
The growing adoption of the company’s multi-project wafer processing service, which allows customers to reduce mask costs, is driving its customer momentum further.
Solid Customer Momentum Drives TSM’s 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.
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 due to rising demand for high-end chips used in AI applications.
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $22.72 billion, indicating year-over-year growth of 31.5%.
The consensus mark for third-quarter 2024 earnings is pegged at $1.74 per share, suggesting year-over-year growth of 34.9%. The estimate has been revised upward by 1.2% in the past 30 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $85.62 billion, indicating year-over-year growth of 23.6%.
The consensus mark for 2024 earnings is pegged at $6.45 per share, indicating year-over-year growth of 24.5%. The estimate has been revised upward by 2.2% in the past 60 days.
Image Source: Zacks Investment Research
TSM Offers Attractive Valuation
TSM stock is currently trading at a discount with a forward 12-month P/E multiple of 21.57X, lower than the sector’s average of 25.94X. This reflects a good entry point for the investors.
Image Source: Zacks Investment Research
Conclusion
Investors considering Taiwan Semiconductor should weigh its robust technological foundation and strong positioning in the promising semiconductor industry. Its solid customer momentum and strong network of semiconductor fabs present a lucrative opportunity for investors to add the TSM stock to their portfolio.
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.