On Thursday, Needham reaffirmed its Buy rating on shares of Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) with a steady price target of $210.00. The firm's analysis followed TSMC's recent financial results, which surpassed consensus forecasts for revenue and earnings, despite a slight miss on gross margins in the second quarter of 2024. The company has also projected third-quarter revenues that exceed market expectations.
TSMC's second-quarter performance demonstrated its ability to outperform market estimates on key financial metrics. However, the gross margin reported was not up to the consensus predictions for the period. In light of these results, Needham has made minor revisions to its financial model for TSMC, slightly reducing the full-year 2024 earnings forecast and redistributing some expected revenue from the third to the fourth quarter, in accordance with the guidance provided by TSMC's management.
Despite the adjustments, Needham's outlook for TSMC remains positive for the fiscal year 2025, with no changes to the forecast. The firm's stance is that the market's negative reaction to TSMC's margin miss is premature. Needham suggests that investors consider the current dip in TSMC's stock price as an opportunity to purchase shares.
The semiconductor industry, which TSMC is a significant part of, is keenly watched by investors for signs of growth and stability. TSMC's ability to exceed revenue and earnings expectations while providing strong guidance for the upcoming quarter signals confidence in its operational performance and future prospects.
Needham's endorsement of TSMC's stock comes at a time when investors are evaluating the company's financial health and potential for sustained growth. The maintained price target of $210 indicates the firm's belief in the value and resilience of TSMC amidst market fluctuations.
In other recent news, ASML Holding NV (AS:ASML), a prominent player in the semiconductor industry, has been the subject of various developments. The company's third-quarter revenue guidance fell short of consensus estimates, leading to a dip in its share value. Despite this, Wolfe Research maintained an Outperform rating on ASML, attributing the revenue shortfall to timing issues and anticipating significant revenue improvement in the second half of 2024.
ASML's second-quarter bookings were driven by memory DUV, with expectations for TSMC's N2 EUV orders in the second half. This bolsters confidence in future bookings and suggests a high probability of achieving the high end of the 2025 guidance. Meanwhile, Cantor also expressed a positive outlook for ASML, anticipating a potential modest beat in the upcoming earnings report and focusing on the company's bookings.
On a broader scale, the technology sector has been affected by escalating US-China trade tensions, particularly concerning stricter export controls on semiconductor chips to China. This has led to significant sell-offs in tech shares, with ASML's shares also experiencing a downturn. However, ASML is expected to report a substantial increase in new orders in its second-quarter earnings, benefiting from a surge in demand for AI chips.
Finally, the company's shares recently reached an all-time high, driven by growing optimism about the prospects of its top customer, Taiwan Semiconductor Manufacturing Company (TSMC). These developments underscore ASML's significant role in the chipmaking industry and its influence on the global market.
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