On Tuesday, Bernstein maintained its Outperform rating and $258.00 price target on shares of Taiwan Semiconductor Manufacturing Company (NYSE:TSM), now a $859 billion market cap giant. The firm's analysis followed TSMC's reported November revenue of NT$276 billion, a decrease of 12% month-over-month but a significant increase of 34% year-over-year.
According to InvestingPro data, TSMC has demonstrated impressive momentum with a 93% year-to-date return, supported by strong fundamentals and a "Great" overall financial health score. The combined revenue for October and November reached NT$590 billion, which is 69.6% of the company's fourth-quarter 2024 guidance midpoint. This figure is towards the higher end of the historical range of 65-72% seen over the past eight years.
Bernstein's assessment suggests that if December follows the average seasonality from the past eight years, TSMC's fourth-quarter 2024 revenue could surpass the guidance midpoint by 1.7% and consensus estimates by 1.2%.
The analysis also took into account the foreign exchange rates for October and November, which were approximately 0.8% ahead of TSMC's guided rates. Adjusting for this slight currency tailwind, Bernstein found that monthly sales were largely tracking in line with expectations.
The firm highlighted that TSMC is poised for impressive growth, driven by secular gains in artificial intelligence (AI), central processing units (CPUs), and mobile technologies. InvestingPro subscribers can access detailed analysis showing TSMC's robust 22.65% revenue growth and industry-leading 54.45% gross profit margin.
The company's next earnings report is scheduled for January 16, 2025, where investors will gain more insights into these growth initiatives. TSMC's capacity plans for CoWoS (Chip on Wafer on Substrate) are becoming more aggressive to meet the strong demand from AI sectors.
Moreover, demand for TSMC's N3 and N5 technologies is expected to be supported by their increasing penetration into the CPU market, with customers like AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC) outsourcing, as well as Arm-based CPU vendors.
Further growth prospects for TSMC include the smartphone segment, which could benefit from an increase in content to support edge AI. Gains by Qualcomm (NASDAQ:QCOM) at Samsung (KS:005930) and by MediaTek in China are also expected to contribute positively to TSMC's performance. These factors are anticipated to more than offset any slow recovery and competition in mature technology nodes.
Looking ahead, Bernstein projects a 30% growth in earnings per share (EPS) for TSMC in 2025. For 2026, the potential headwind from Intel's insourcing of Panther Lake is expected to be less impactful than previously anticipated, as it is likely to be limited to the compute tile and notebook CPUs. As a result, TSMC is projected to still enjoy a 24% EPS growth in 2026.
While TSMC currently trades at a P/E ratio of 26.87, InvestingPro analysis suggests the stock is slightly overvalued at current levels, despite strong analyst consensus recommending a Buy. Subscribers can access the comprehensive Pro Research Report, which provides detailed valuation analysis and growth projections among 20+ additional ProTips.
In other recent news, Taiwan Semiconductor Manufacturing Company (TSMC) has seen a series of upgrades from prominent analyst firms following a strong third-quarter performance. Nomura/Instinet maintained a Buy rating on TSMC, increasing the price target to NT$1,400.00.
TSMC's robust gross margin for the third quarter of 2024 reached 57.8%, exceeding market expectations and suggesting a new standard for the company. The semiconductor giant's forecast for fourth-quarter 2024 revenue growth is set at 13% quarter-over-quarter, surpassing both analyst and market estimates.
Likewise, BofA Securities and UBS have raised their price targets for TSMC, maintaining their respective buy ratings. Both firms are optimistic about TSMC's future, citing the company's leadership in the semiconductor industry and potential for continued growth. TSMC's third-quarter gross margin also made headlines, reaching 57.8%, higher than the company's guided range of 53.5-55.5%.
In addition, TSMC reported a 12.8% sequential revenue increase to NT$23.5 billion in the third quarter of 2024, driven by strong demand for 3-nanometer and 5-nanometer technologies in smartphones and AI applications. The company also anticipates Q4 2024 revenue to be between $26.1 billion and $26.9 billion. These recent developments underline TSMC's robust financial performance and promising growth trajectory.
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