On Thursday, JPMorgan maintained its Overweight rating and NT$1,200.00 price target on Taiwan Semiconductor Manufacturing Company (2330:TT) (NYSE:TSM), citing expectations for a robust third-quarter earnings report.
The firm anticipates that TSMC's revenue will slightly exceed the upper end of the company's forecast, with projected revenues of US $23.3 billion against guidance of US$22.4-23.2 billion. Gross margins (GMs) are also expected to be at the high end of TSMC's forecast, with an estimate of 54.8% compared to the projected range of 53.5-55.5%.
The positive outlook is partly attributed to the strong growth in the N3 technology node, which is used for the latest iPhone builds and new application processors from companies like Mediatek and Qualcomm (NASDAQ:QCOM). Additionally, the N4 node, primarily utilized for AI accelerators, is expected to contribute to the company's revenue growth. JPMorgan forecasts a quarter-over-quarter revenue increase of approximately 10% for the fourth quarter of 2024 due to these factors.
JPMorgan also anticipates that TSMC will continue to communicate strong demand trends for its N3 technology and a persistent supply-demand gap for advanced packaging solutions, particularly the Chip on Wafer on Substrate (CoWoS) technology.
The firm's outlook is bolstered by the expectation that 2025 will be a strong year for TSMC. This optimism is based on the sustained demand for AI accelerators, the expansion of N3 engagements beyond Apple (NASDAQ:AAPL), and an anticipated uptick in gross margins due to improved yields and potential price increases for the N3E technology node.
In other recent news, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) has reported significant growth in its second quarter of 2024, with a sequential revenue increase of 13.6% in NT dollars and 10.3% in USD. The company's gross margin rose to 53.2%, and its operating margin reached 42.5%. TSMC's High-Performance Computing (HPC) segment accounted for more than half of the total revenue for the first time, standing at 52%. The company revised its full-year revenue guidance to a growth rate slightly above the mid-20s percent in USD terms.
BofA Securities maintained a positive outlook on TSMC, reiterating a Buy rating. The firm highlighted the upcoming delivery of a high-numerical aperture extreme ultraviolet (EUV) lithography tool to TSMC from ASML (AS:ASML), which is expected to enhance the company's capabilities in developing advanced semiconductor processes. TSMC's August financial report showed a revenue of NT$251 billion, a 2% decrease month-over-month but a 33% increase year-over-year.
Bernstein SocGen Group updated its outlook on TSMC, increasing the price target to $220 from the previous $200, and retaining an Outperform rating on the stock. The firm suggests TSMC is well-positioned to perform better than its peers should a recession occur, due to its advanced technologies and market share gains. Finally, TSMC's capital expenditure for 2024 is projected to be between USD 30 billion and USD 32 billion, primarily allocated to advanced process technologies.
InvestingPro Insights
As Taiwan Semiconductor Manufacturing Company (TSM) approaches its next earnings date on October 17, 2024, the company's financial health and market performance remain a focal point for investors. With a market capitalization of $803.45 billion and a P/E ratio of 27.72, TSMC stands as a significant player in the semiconductor industry. In the last twelve months as of Q2 2024, TSMC has reported a revenue growth of 9.44%, showcasing its ability to expand amidst a dynamic tech landscape. This is further evidenced by a substantial quarterly revenue growth of 40.07% in Q2 2024, highlighting the company's strong performance in the short term.
InvestingPro Tips suggest that TSMC's robust gross profit margin of 53.36% aligns with JPMorgan's expectations of high-end gross margins for the company. Additionally, with a dividend growth of 42.6% in the same period, TSMC demonstrates its commitment to returning value to shareholders. It's worth noting that the InvestingPro product lists 15 additional tips that can provide deeper insights into TSM's financial health and investment potential.
Investors may also find TSMC's price resilience of interest, with the stock trading at 94.25% of its 52-week high. This, combined with a year-to-date price total return of 76.84%, positions TSMC favorably in the eyes of growth-oriented investors. The company's fair value, as assessed by analysts, stands at $214, while InvestingPro's fair value estimation is at $161.5, offering a perspective on the stock's potential undervaluation or overvaluation.
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