Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) shares rose 3.79 percent last week ahead of the company’s earnings conference on Thursday, outperforming the broader market’s 2.07 percent increase.
Yuanta Securities Investment Consulting Co (元大投顧) has retained its “buy” rating on the stock, with a 12-month target price of NT$584, expecting TSMC to maintain its tech leadership in the semiconductor industry.
The target price represents a 33.33 percent upside from the stock’s closing price of NT$438 on Friday in Taipei trading.
Photo: I-Hwa Cheng, Bloomberg
“Although TSMC is not immune to inventory adjustments in the short term, we are still optimistic about its leadership position and expect the advanced process technologies to boost its medium and long-term operational momentum,” Yuanta said in a client note on Friday.
“TSMC’s outlook is still good with stable profit prospects compared to second-tier foundries,” it said, adding that any significant correction in the near term would represent an opportunity to accumulate the stock for the long term.
TSMC on Friday reported third-quarter revenue of NT$613.14 billion (US$19.36 billion), up 14.79 percent from the previous quarter and an increase of 47.85 percent from a year earlier.
The contract chipmaker’s record quarterly revenue came as major customer Advanced Micro Devices Inc (AMD) on Thursday said that third-quarter sales would miss a prior forecast amid weaker-than-expected demand for PCs. In August, Nvidia Corp, another major customer, predicted that sales would fall short of its expectations for the latest quarter, largely due to weakness in the gaming market.
TSMC is scheduled to report its third-quarter earnings result on Thursday, and the market’s focus is to be on the chipmaker’s capacity utilization, the progress in its advanced process technologies and plans for price hikes, Yuanta said.
Additionally, investors are expected to observe whether TSMC retains its revenue growth forecast of an annual compound rate of 15 to 20 percent over the next few years, while also paying attention to the chipmaker’s capital spending estimate for next year and when its customers’ inventory adjustments might end, the note said.
“We expect the inventory adjustments triggered by the declining end-market consumer demand to impact TSMC’s sales from the fourth quarter this year to May next year,” Yuanta said.
Sales would resume growth from the third quarter next year, driven by the 5G, artificial intelligence and high-performance computing trends, with a significant contribution from 3-nanometer process technology, it said.
Many IC design companies have reportedly received TSMC’s notices of price hikes. If true, the benefits of price increases would gradually emerge from January next year to help boost TSMC’s average selling prices by about 3 percent, contributing to 9.1 percent sales growth annually next year, Yuanta said.
TSMC’s capital spending for next year is forecast to fall by 5 to 10 percent in US to between US$36 billion and US$38 billion, Yuanta said, citing the long lead times for equipment delivery and inventory adjustment risk.
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