Taiwan Semiconductor Manufacturing Co., Ltd. TSM is the new poster child for the global artificial intelligence (AI) craze. The company is the largest manufacturer of AI-based chipsets for the world’s best AI chipset developers.
TSM offers a wide range of wafer fabrication processes, including processes for manufacturing complementary metal-oxide-semiconductor logic, mixed-signal, high-frequency, embedded memory, bipolar CMOS mixed-signal, and more.
Solid 3rd quarter outlook for TSM stock
On October 9, Taiwan Semiconductor reported sales of approximately $7.82 billion in September. In addition to its August and July results, TSM is expected to report $23.6 billion in revenue in the third quarter of 2024.
If realized, this number would exceed the current Zacks Consensus Estimate and the company’s guidance provided during its Q2 2024 earnings call. TSM said the steady adoption of AI and smartphones has increased demand for cutting-edge process technology.
TSM has a strong customer base. The company is the largest manufacturer of NVIDIA Corp.’s NVDA chipsets. NVIDIA is the world’s largest developer of generative AI-based chips. TSM also supports Advanced Micro Devices Inc. AMD, Apple Inc. AAPL, Broadcom Inc. AVGO, and Intel Corp. INTC, to name a few.
Taiwan Semiconductor is scheduled to announce its third quarter 2024 financial results before the opening bell on October 17th. The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Solid Earnings Forecast Revision for TSM Stock
The Zacks Consensus Estimate for Q3 2024 is currently calling for revenue of $22.72 billion, an improvement of 31.5% from the prior year and earnings per share (EPS) of $1.74, an increase of 34.9% from the prior year. is shown. The company reported unexpected positive earnings over the past four quarters, with an average profit margin of 7.8%.
Additionally, TSM has seen positive earnings estimate revisions for full-year 2024 and 2025 within the past 60 days. Currently, the Zacks Consensus Estimates are pointing to 2024 revenue and EPS growth of 23.6% and 24.5%, respectively, from the prior year.
Despite this solid growth, current Zacks Consensus Estimates for TSM’s full-year 2025 earnings and EPS reflect 23.5% and 28.4% upside, respectively. Additionally, TSM’s long-term (3-5 year) EPS growth rate of 26.5% is significantly higher than the market-wide index S&P 500’s growth rate of 13.6%.
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TSM stock price has soared since the beginning of the year
Taiwan Semiconductor is experiencing strong demand for advanced technologies such as 3 nanometers (nm) and 5nm. Customer momentum is increasing with increased adoption of multi-project wafer processing services that enable customers to reduce mask costs.
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It’s a positive that TSM is ramping up its efforts to ramp up 3nm production and 2nm development. Additionally, the overall strength of 7nm, 16nm and 28nm technologies also contributed significantly to sales growth. As a result, TSM stock has soared 84.8% year-to-date.
The chart below shows TSM’s year-to-date price performance.
Image source: Zacks Investment Research
TSM stock still has room to rise further
Taiwan Semiconductor is currently trading near a 52-week high. Despite this, the average short-term price target among brokerages is an increase of 7.3% from the previous closing price of $192.21. Brokerage target prices currently range from $170 to $250. This represents an upside of ~30.1% and a ~11.6% downside.
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