Taiwan Semiconductor Manufacturing Company (NYSE: TSM) surpassed revenue and profit expectations in the second quarter due to demand for advanced chips in artificial intelligence (AI) applications.
TSMC reported revenue of NT$673.51 billion ($20.82 billion), exceeding the expected NT$657.58 billion, and net income of NT$247.85 billion, higher than the anticipated NT$238.8 billion.
Compared to a year ago, net revenue rose by 40.1%, and net income increased by 36.3%. The firm had projected second-quarter revenue to be between $19.6 billion and $20.4 billion.
In an earnings call, Chairman and CEO C.C. Wei noted that solid demand for TSMC’s industry-leading 3-nanometer and 5-nanometer technologies supported business in the second quarter despite continuous smartphone seasonality.
The explosive demand for AI has stretched chip supplies. TSMC is the world’s primary producer of advanced chips in everything from smartphones to AI applications.
After posting a beat on earnings on July 18, Needham analysts were the first to respond to the positive developments surrounding the semiconductor maker.
Charles Shi, an analyst at Needham, has reaffirmed a “buy” rating and a $210 price target for Taiwan Semiconductor stock.
In his latest update, Shi made minor adjustments to the TSMC model following the company’s Q2 2024 results. TSMC surpassed consensus estimates for revenue and profit, although its gross margin was slightly below expectations. TSMC’s guidance for Q3 2024 is also higher than consensus estimates.
Consequently, Shi has marginally lowered the FY24 forecast, reallocating some revenue from Q3 to Q4 while keeping the FY25 forecast unchanged. He views the recent stock sell-off as unwarranted and suggests buying the stock during this weakness.
The bullish stance doesn’t stop at Needham, as other analysts view TSM stock as a “strong buy” based on 11 examinations that all agree on a “buy” rating and an average price target of $184.30 which represents 7.30% potential upside due to decreasing stock price in the previous day brought by the larger downturn in the tech sector.
On July 11, Mehdi Hosseini from Susquehanna increased the price target for TSM stock by 25%, moving it from $200 to $250, and continues to rate the stock as a “buy.”
Hosseini is optimistic about TSM’s performance in the next quarter. He anticipates that the company will exceed expectations and raise its guidance.
He maintains confidence in his higher-than-consensus estimates and views any stock pullbacks as opportunities to buy.
With the recent pullback that TSM stock experienced in the previous days, which reduced its price by 6.12% and lowered its valuation to $171.87, now might be the opportunity analysts mentioned.
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