Taiwan Semiconductor Manufacturing Company Ltd. TSM is scheduled to report second-quarter 2024 results on Jul 18.
Robust demand for advanced technologies, solid momentum among customers, increasing design wins, and a strong presence in the domestic and international markets are expected to have favored the company in the quarter-to-be reported.
For the second quarter, Taiwan Semiconductor expects revenues between $19.6 billion and $20.4 billion. The Zacks Consensus Estimate for the same is pegged at $20.2 billion, indicating a rise of 28.9% from the year-ago quarter’s actual.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.37 per share, which implies growth of 20.2% from the year-ago quarter’s reported number. The estimate has been revised upward by 2.2% over the past seven days.
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Taiwan Semiconductor has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, the average beat being 7.46%.
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Earnings Whispers
Our proven model predicts an earnings beat for Taiwan Semiconductor this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
TSM has an Earnings ESP of +4.03% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Quarterly Performance
Taiwan Semiconductor has been a major player in the semiconductor industry, which is witnessing a solid rebound on the optimism surrounding artificial intelligence (AI).
The explosion of AI in both production processes and final products has created tremendous opportunities for chipset manufacturers. The data-centric computing architecture, especially cloud computing, the Internet of Things and the metaverse, has expanded the horizon for semiconductors. This factor is expected to have benefited the company in the quarter under review.
Taiwan Semiconductor’s continuous investments in leading-edge and specialty technologies are anticipated to have aided the company’s quarterly performance.
Strength in 7nm and 3nm technologies is expected to have driven TSM’s performance in the to-be-reported quarter. The solid adoption of 5nm technology is likely to have contributed well to the wafer revenues of the company in the to-be-reported quarter.
Taiwan Semiconductor’s growing efforts to ramp up the production of 3nm and development of 2nm are anticipated to have been tailwinds.
The company’s expansion into new applications, such as HPC (high-performance computing) and smartphone applications, is anticipated to have contributed well in the quarter to be reported. TSM is expected to have sustained its solid momentum in HPC, which has become one of its key growth drivers, on the back of its 3nm Fin Field-Effect Transistor (FinFET), 4nm FinFET, 5nm FinFET, 6nm FinFET, 7nm FinFET and 12nm/16nm FinFET.
TSM’s 3nm FinFET enhanced, 4nm FinFET plus and 5nm FinFET plus, along with 3nm, 4nm and 5nm FinFETs, are expected to have driven its momentum across smartphone applications in the to-be-reported quarter.
Taiwan Semiconductors’ growing momentum across automotive, Internet of Things and digital consumer electronics applications on the back of advanced technologies is likely to have been a positive.
The solid adoption of its multi-project wafer processing service, which allows customers to reduce mask costs, is likely to have contributed to top-line growth.
The company’s strong customer relationships with chipmakers like NVIDIA NVDA, Advanced Micro Devices AMD and Intel INTC are expected to have been major positives. TSM is one of the largest manufacturers of NVIDIA’s chipsets.
However, rising macroeconomic uncertainties, inflationary pressure and geopolitical tensions, especially between the United States and China, are expected to have acted as headwinds for the company in the quarter under review.
Price Performance & Valuation
Taiwan Semiconductor’s shares have appreciated 78.1% on a year-to-date basis, outperforming the S&P 500 index’s rise of 16.9% and Zacks Computer and Technology sector’s rally of 25.5%.
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Although TSM’s valuation looks stretched at the current level, as reflected by the Value Style Score of C, its Growth Style Score of B is hard to ignore.
Investment Thesis
Taiwan Semiconductor’s strength in chip manufacturing, strong position in the semiconductor industry, robust portfolio of technologies, and expanding network of semiconductor facilities, which currently includes one 150mm wafer fab, six 200mm wafer fabs, six 300mm wafer fabs, and five advanced backend fabs, bode well for its near and long-term prospects.
These factors make TSM well-positioned to ride on the growing proliferation of AI, smartphones and electric vehicles. The company projects low-to-mid 20% growth in 2024 revenues on rising demand for high-end chips used in AI applications.
On the back of these factors, Taiwan Semiconductor presents an attractive investment option for its investors.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
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