Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker, on Thursday beat analyst estimates for the third quarter. TSM stock rose on the news.
The company, better known as TSMC, earned $1.29 per U.S. share on sales of $17.28 billion in the September quarter. Analysts polled by FactSet had expected earnings of $1.16 a share on sales of $16.97 billion. However, TSMC earnings fell 24% year over year while sales dropped 10%.
TSMC's results marked its third straight quarter of declining sales and earnings as its customers navigate a downturn in chip demand. TSMC's customers include Apple, AMD, Nvidia, Qualcomm and more.
For the current quarter, TSMC predicted revenue of $18.8 billion to $19.6 billion. The midpoint of $19.2 billion is above Wall Street's target of $18.54 billion. In the fourth quarter last year, TSMC generated $20.54 billion in sales.
TSM Stock Rises After Report
On the stock market today, TSM stock climbed 3.7% to close at 92.91.
"Our third-quarter business was supported by the strong ramp of our industry-leading 3-nanometer technology and higher demand for 5-nanometer technologies, partially offset by customers' ongoing inventory adjustment," Chief Financial Officer Wendell Huang said in a news release. Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
He added, "Moving into fourth quarter 2023, we expect our business to be supported by the continued strong ramp of our 3-nanomenter technology, partially offset by customers' continued inventory adjustment."
TSMC Close To Next Cyclical Upturn
Needham analyst Charles Shi reiterated his buy rating on TSM stock with a price target of 115.
"TSMC's strong results suggest the industry is close to a bottom and about to enter the next cyclical upturn," Shi said in a client note.
TSMC management said the company is seeing signs of stabilization in PC and smartphone chip demand, he said.
"TSMC delivered what we think is its first clean beat of this down cycle, without any downward revision to its outlook," Shi said.
Wedbush Securities analyst Matt Bryson kept his outperform rating on TSM stock. He also raised his price target on TSMC's Taiwan-traded shares.
"TSMC sales strength was driven by improvements in handset (Apple) and IoT (Internet of Things) end markets as well as a continuing solid contribution from HPC (high-performance computing)," Bryson said in a client note. AI chip demand is strong but automotive chips are in an inventory adjustment period, he said.
Taiwan Semiconductor ranks No. 8 out of 32 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. TSM stock has an IBD Composite Rating of 77 out of 99.
IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
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