Taiwan Semiconductor Manufacturing, the world's top chip foundry, on Thursday smashed expectations for the first quarter and guided higher for the current period. But TSM stock fell despite the positive report.
The company, better known as TSMC, earned $1.40 per U.S. share on sales of $17.57 billion in the March quarter. Analysts had expected TSMC to earn $1.27 a share on sales of $16.74 billion, according to FactSet. On a year-over-year basis, Taiwan Semi's earnings rose 47% while sales increased 36%.
For the second quarter, TSMC forecast revenue of $17.6 billion to $18.2 billion. The midpoint of $17.9 billion tops Wall Street's consensus estimate of $17.33 billion.
Taiwan Semi predicted a gross profit margin of 56% to 58% in the June quarter. That's up from 55.6% in the March quarter.
TSM Stock Seesaws
In morning trading on the stock market today, TSM stock initially climbed 3% but then reversed. TSM stock ended the regular session down 3.1% to 98.36.
"Our first-quarter business was supported by strong HPC (high-performance computing) and automotive-related demand," Chief Financial Officer Wendell Huang said in a news release.
He added, "Moving into second quarter 2022, we expect our business to continue to be supported by HPC and automotive-related demand, partially offset by smartphone seasonality."
In the first quarter, shipments of 5-nanometer chips accounted for 20% of total wafer revenue and 7-nanometer chips accounted for 30%. Advanced technologies, defined as 7-nanometer and more advanced technologies, accounted for 50% of total wafer revenue. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
Taiwan Semi Gaining From Technology Shifts
Meanwhile, Wedbush Securities analyst Matt Bryson reiterated his outperform rating on TSM stock after the report.
"We continue to see TSMC benefiting from structural shifts in technology innovation requiring increased semiconductor content (e.g., 5G, AI, etc.)," he said in a note to clients. "The resulting elevated growth rate for semis combined with TSMC's ongoing share gains should drive accelerated growth for TSMC over the intermediate term."
Further, TSMC has been taking market share from Intel, Bryson said.
TSM stock ranks No. 17 out of 44 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has a middling IBD Composite Rating of 69 out of 99. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Since hitting a record high of 145 on Jan. 13, TSM stock has fallen 30% as of Wednesday's close of 101.50.
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