Annabelle Chih
Taiwan Semiconductor’s (NYSE:TSM) most recent earnings report received good reviews from several Wall Street firms.
The company’s third-quarter results beat expectations and its outlook for the coming quarter beat expectations.
Shares are up 4% on Thursday.
Bank of America, which has a Buy rating on the stock, boosted its earnings estimates for Taiwan Semiconductor (TSM). The global foundry, which competes with companies like Samsung (OTCPK:SSNLF), GlobalFoundries (GFS) and to some extent Intel (INTC), is a tech leader and has fresh upside from emerging end-device artificial intelligence, or bringing AI to smartphones and PCs.
The firm added that the valuation of 13.5 times estimated 2024 earnings, compared to a historical range of 10 to 26 times earnings, makes for an attractive entry.
Third-quarter earnings per share came in 8% above the bank’s expectations, led by a stronger gross margin on favorable foreign exchange and higher utilization rates. Fourth-quarter revenue guidance also came in ahead of expectations as its 3 nanometer technology ramps up.
“Management looks optimistic on 2024 recovery as inventory digestion approaches the end, rush order increases and PC/smartphone demand stabilizes,” analysts led by Brad Lin wrote in a note. The company sees no share shift and limited competition threats.
Taiwan Semiconductor (TSM) sees cloud AI strength, aided in part by Nvidia (NVDA), and is on track to expand its chip-on-wafer-on-substrate platform for high-performance computing applications capacity by 100% year-over-year as of the end of next year.
The company also dismissed the latest U.S. restrictions on Chinese exports meant to further curb the use of AI, saying it sees limited near-term impact.
Susquehanna’s Mehdi Hosseini and Kenneth Wu, which have a Positive rating on the stock, said Taiwan Semiconductor (TSM) “remains one of the best quality undervalued names in our coverage universe.”
Taiwan Semiconductor also updated its capital expenditure plan for the year, lowering it to $32B, down from a prior forecast of $32B to $36B.
“Consistent with our view, TSM is seeing overall semi cycle bottoming though there remains lack of visibility on the rate of recovery. Nonetheless, TSM is expected to continue to benefit from the ramp of customers’ new products into [the first-half of 2024],” Susquehanna said.
