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Taiwan Semiconductor Manufacturing Company (TSM) is the world’s biggest semiconductor foundry, valued at $893.8 billion by market cap. TSM designs, produces, and manufactures dedicated and integrated circuits. Its chips are widely used in products such as computing, smartphones, internet of things (IoT), and digital consumer electronics, for massive tech clients that include Nvidia (NVDA), Apple (AAPL), and Advanced Micro Devices (AMD), to name a few.
TSM is headquartered in Hsinchu, Taiwan, and is critically important to the global semiconductor supply chain.
The stock has delivered considerable growth this year, gaining 62.7% YTD, and setting an all-time high of $193.47 in July. Since then, though, Taiwan Semi shares have shed more than 13% amid widespread weakness in tech names.
TSM Delivers Stellar Results
The Taiwan-based foundry delivered forecast-crushing Q2 results in July, as revenue jumped 32.% YoY, crossing the $20 billion mark to $20.82 billion, and beating analysts' estimate of $20.09 billion. Earnings arrived at $1.48 per share, better than Wall Street’s $1.42 per share estimate, driven by strong demand for artificial intelligence (AI) hardware and services.
Gross margin for the quarter increased from 42.5% to 53.2%, while net margin came to 36.8%. TSM reported a 15% increase in its 3nm revenue, 35% in 5nm, 17% for 7nm, and advanced technologies accounted for 67% of total wafer revenue.
For the ongoing Q3, management has guided for revenue between $22.4 billion and $23.2 billion, indicating a 32% rise YoY at the midpoint, and a strong 9.5% increase from Q2. TSM expects gross profit between 53.5% to 55.5%, and operating profit in the range of 42.5% and 44.5%.
More recently, the company said July sales surged 45% year over year.
Further, Intel’s (INTC) disastrous earnings report could be a positive sign for TSM, as it seems the upstart foundry business isn't quite a threat to the industry giant just yet.
Analysts Say TSM Stock is a Strong Buy
Analysts are very positive on TSM, as indicated by a consensus “Strong Buy” rating and a mean price target of $204.71 - which indicates an upside potential of 21.5% from the current market price.
Out of 10 analysts in coverage, 8 have a “Strong Buy” rating, compared to 1 “Moderate Buy” and 1 “Hold.”
With a price/earnings-to-growth (PEG) ratio of 0.98 and a forward dividend yield of 1.27%, TSM looks like a reasonable semiconductor stock to buy on the dip.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
