TSMC Stock Surges 10% as Analysts Predict Continued Growth
Shares of Taiwan Semiconductor Manufacturing Company Limited (TSM) experienced a significant surge of nearly 10% on Thursday following an optimistic outlook from the foundry. Needham analyst Charles Shi believes there is more room for growth and has maintained a Buy rating on the stock while raising the price target from $115 to $133, implying an approximately 18% potential upside.
According to Needham’s analysis, TSMC is expected to absorb excess capacity and rebalance supply and demand by the end of 2024. While there is a projected below-trend fab utilization rate in 2024, the analyst anticipates significant improvements in 2025, with continued revenue growth and capex recovery.
One key factor driving TSMC’s growth is its decision to transition from 5nm to 3nm processor node technology in the second half of 2024. This move is linked to the company’s plan to shift 5nm production from Taiwan to the United States, with the Arizona plant expected to go online in the first half of 2025. Shi believes that if 5nm demand remains strong, there is a chance for TSMC to accelerate the Arizona mass production schedule to 2024.
Despite a cautious stance on calling the end of the automotive inventory correction, the analyst expects TSMC’s content growth in the auto sector to support automotive revenue growth, independent of the inventory cycle. While TSMC’s earnings might be impacted by depreciation expense growth in 2024, Shi views it as a positive move for the company to restore the supply/demand balance. He also highlights the potential for strong CapEx growth in 2025.
Needham largely maintains revenue estimates beyond the first quarter of 2024, forecasting a 27% growth in U.S. dollar terms for the full year. Shi believes these estimates are achievable as industry fundamentals continue to improve, stating that “TSMC tends to be conservative on the way up, we think our estimates remain within reach.” The analyst projects a 20% revenue growth in 2025, even without contributions from 2nm revenue.
TSMC shares ended Thursday’s session up 9.79% at $113.03. The surge in stock price reflects the market’s confidence in TSMC’s future growth potential.
In conclusion, TSMC’s optimistic outlook and strong growth prospects have propelled its stock to new heights. With the company’s plans to transition to advanced processor node technology and expand its production capabilities in the United States, TSMC is well-positioned to capitalize on the increasing demand for semiconductors. Investors and analysts continue to be bullish on the stock, expecting further growth and potential upside in the coming years.
