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Taiwan Semi (TSM) Earnings Preview

by | Oct 11, 2021

Taiwan Semi (TSM) reporting earnings on Thursday 10/14 before the open with the Street looking for $1.04 on $14.82B. Next quarter is being guided to $1.09 on $15.45B while the FY is at $4.05/$56.74B. Shares have closed higher in four of the last seven but down the last two. The average closing move has been 2% and the max move of 6.05%. The current implied move is 3.5%. TSM has seen a lot of bullish flows lately including buyers last week in the January 2023 $105 calls for $2.3M, the March $110 calls for $2M, and the October $112 calls. TSM has seen bullish put sales too in the March $115 and $85 strikes and April $95 and $80 strikes. On the chart, shares are trading below monthly value at $111 and a move higher targets VPOC at $115.85. Shares have been rangebound since February between $125 and $105 and back near the low-end of that range, so potentially a nice risk/reward for a move higher. The $532B company trades 22.85X earnings, 10.2X sales, and 16.77X cash. TSMC should continue to see strong demand as they remain positioned well for a multi-year trend in 5G, automotive and HPC-related applications which will drive more complex computing processes. They saw supply chain challenges in Q2 but expect them to be temporary while the long-term trends remain robust. They are working on capacity additions and better pricing is helping them mitigate cost challenges as well. Analysts have an average target for shares of $127 with a Street High $150. Susquehanna upgrading shares to Neutral in July citing an improving smartphone market with the correction in builds behind us. They also note TSMC is benefitting from better revenue diversification led by cloud infrastructure. Citi positive in July as the company ramps output of chips for Intel which is looking to win back share in the server market. Argus has a Buy rating for shares and $150 PT. The firm like’s TSM’s aggressive five-year capital spending plan and the company is emerging as a key solutions provider toward resolving bottlenecks in the global electronics supply chain. They also view TSMC as being positioned for multiple years of exceptional growth given accelerated demand for traditional IT products, cyclical drivers such as 5G and cloud data center, along with longer-term drivers such as AI, IoT, and autonomous driving. Hedge fund ownership fell 4% last quarter. Sanders Capital adding another 1M shares and now their top holding with 40.4M total.

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