The company is the 3rd largest semiconductor manufacturer in the world after Intel and Samsung, and the world’s largest independent manufacturer of semiconductor products. Taiwan Semiconductor Manufacturing Company bears many strengths to its name. It has a strong market position with a client base of over 700 customers. The company caters well to its customers by providing over 11,000 different products, including drivers, central processing units (CPUs), and network interface controllers among many more.
Quarterly Results
In the past two quarters of 2021, TSMC comfortably beat Wall Street expectations. It recorded a profit of $5.6 billion in the third quarter, compared to $5.41 billion forecasted. Revenue has also surged 22.6% year-over-year in U.S. dollar terms.
The success can be attributed to escalating semiconductor-chip demand on a worldwide scale, among the ever-more-growing electric vehicle industry and technological advances in multiple industries.
In the fourth quarter, profit was $6.03 billion against the $5.87 billion expected by analysts. Revenue was also more than expected, up 24.1% year-over-year.
The Taiwanese giant exhibited an incredible quarter amid booming chip demand for smartphones, laptops, and other gadgets, fueled by the chip shortage caused by the COVID-19 pandemic and its repercussions on major economies.
Fundamental Analysis
The company enjoys high profitability not only due to the rapid rise in demand for its chips by major tech tycoons, but also through its economies of scale. TSMC achieves superior profit margins of 38%, outperforming 96% of the rest of the industry in this aspect, as the company invests heavily into technology, research and development (R&D), and maintains low costs through basing its manufacturing and production in the third-world country of Taiwan.
No wonder why TSMC is the 9th most valuable company in the world with regards to market capitalization, recently surpassing giants including Nvidia and Tencent, with a market capitalization of $609 billion.
Technical Analysis
Looking into the technical analysis of TSMC, the short-term trend is positive, but is predominantly negative in the long-run. With a share price currently valued at $117 apiece, the stock is trading in the lower part of its 52-week range, indicating that the company’s performance is weaker than that of the market in average.
When examining the price chart provided by TradingView, the stock is trading between several support and resistance levels. The first support level lies at $117, another at $113, and a third hovers near $108. Regarding stock price resistance, a horizontal resistance level lies at $119. Hand-in-hand with the large average volume of TSMC stock and transactions, it is expected that the stock price escalates with such momentum.
Stock Performance
Regarding stock performance, the company is enjoying an impressive escalation of 279% in 5 years’ time. In just one year, the company’s share price declined by over 3%, 2.3% in 1 month and 8.7% since the beginning of 2022. The reason for such decline can be the result of surging inflation in the United States and rising geopolitical tensions in the Middle East and Eastern Europe, which has shaken global economies.
Despite that, the TSMC stock is deemed as quite the attractive stock for traders & investors, with analysts believing that its current share price presents a lucrative entry point for traders.
Future TSMC Plans
TSMC has several plans lined up for the future.
1- Research and development: TSMC plans to continue to invest heavily in R&D, driven to improve its current products and innovating even smaller nodes and 3D transistors, which feed heavily into technology platforms.
2- New factory in Japan: The company aims to expand with the goal of meeting long-term appetite for semiconductor chips. Amid tight global supply and surging demand, this could translate into higher profits and market dominance for the booming Taiwanese business.
3- Mass-producing 3 nano-meter chips: In the second half of 2022, the company aims to mass-produce its new 3 nano-meter chips, which expect to provide expect to provide 70% more logic density, 15% faster and 30% power reduction when compared to its 5 nano-meter chips. This will involve spending of around $100 billion over the next three years. This is because new technologies such as 5G telecommunications and artificial intelligence applications continue to bolster chip demand, and the company aims to keep up with high demand through expanding its operations.
Stock Price Expectations
Analysts from Wall Street Journal had a median stock price target of $163, with a high forecast of $212 and a low estimate of $135. So, it can be argued that the stock rests at a good entry point for traders & investors at the moment, given the increasing popularity, demand & usage of semiconductors, which can be regarded as the gold of the modern era heavily exhausted by technology.
Sources: TSMC – The Motley Fool – Wall Street Journal – Yahoo! Finance – MarketWatch – Financial Times – TradingView – Barron’s
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