Some color on TSM's earnings on Jan 12th and what to expect in the future. RtS
MW TSMCs U.S. stock rallies as Wall Street talks about bottom in the chip sector
2:35 PM ET 1/12/23 | MarketWatch
By Wallace Witkowski
The 'last cut' could be next earnings in April, analyst says
U.S. shares of Taiwan Semiconductor Manufacturing Co. rallied Thursday after the third-party silicon-wafer fabricator's results once again brought up the inevitable speculation about "the bottom" -- and that it may come a quarter later than expected.
American depositary receipts of TSMC (2330.TW) rallied as much as 8.6% to an intraday high of $88.83 and were last up 7.6%, compared with a 0.5% gain on the S&P 500 , a 0.6% gain on the Nasdaq and a 1.5% gain on the PHLX Semiconductor Index . Earlier in the day, TSMC warned of revenue headwinds and lower margins, which one analyst earlier had forecast as a tailwind for the company.
Before earnings, Needham analyst Charles Shi had said the bigger the cut to TSMC's full-year guidance, the better shape things will be in for 2024, indicating a bottoming out in the first half of the year. In a Thursday note, Shi called it "the most anticipated earnings call of this downcycle."
Shi said that TSMC expects slower growth than he expected, implying a bottom in the second quarter, rather than the first quarter as he had forecast. The company's capital-expenditure reduction to between $32 billion and $36 billion was in line with his estimates, and while a narrowing profit margin was not a surprise, a 20% hike to R&D expenses was.
"The key questions are: 1) Can you trust TSMC's call for a [second quarter 2023] bottom? 2) If TSMC's guidance can be trusted (we think so), do investors want to buy the last cut ([first quarter 2023] print in April), or maybe now is the time to buy," Shi wrote.
TSMC forecast first-quarter revenue of $16.7 billion to $17.5 billion and gross margins between 53.5% and 55.5%, slimmer than the fourth quarter's 62.2%. Analysts surveyed by FactSet expect $17.39 billion.
Citi Research analyst Laura Chen, who has a buy rating, said that even though TSMC sees PC and smartphone weakness and potential weakness in the data-center market, it still commands a strong position.
"Thanks to its share gain and content increase, we believe the company would continue to outperform the overall semiconductor market," which she said TSMC expects to be down 3% year over year in estimates for 2023. "On the back of uncertain macro demand, we are waiting for better recovery in [estimates for 2024]."
Of the 39 analysts who cover TSMC, 35 have buy-grade ratings and four have hold ratings, along with an average target price of $145.64, according to FactSet data.
TSMC supplies chip makers that do not have their own fabs, like Nvidia Corp. (NVDA), Advanced Micro Devices Inc. (AMD) and Apple Inc. (AAPL).
-Wallace Witkowski |
