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The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.16 per share, which implies growth of 50% from the year-ago quarter’s reported number. The estimate has been revised upward by 7 cents over the past 60 days.
Image Source: Zacks Investment Research
Taiwan Semiconductor expects revenues between $26.1 billion and $26.9 billion. The Zacks Consensus Estimate for the same is pegged at $26.38 billion, indicating a rise of 34.4% from the year-ago quarter’s reported actuals.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Taiwan Semiconductor has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 7.9%.
Taiwan Semiconductor Manufacturing Company Ltd. Price and EPS Surprise
Our proven model does not conclusively predict an earnings beat for Taiwan Semiconductor this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
TSM has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors to Note Ahead of TSM’s Q4 Results
Taiwan Semiconductor continues to assert its dominance in the semiconductor space, benefiting from a robust industry rebound fueled by the growing prominence of artificial intelligence (AI). The surge in AI-driven applications (in manufacturing and end products) has been a significant catalyst for chipset manufacturers like TSM. The rise of data-centric technologies, especially cloud computing, the Internet of Things (IoT) and the metaverse, has increased the demand for semiconductors, contributing to the company’s business performance in the to-be-reported quarter.
TSM’s consistent investments in next-generation and specialty technologies are likely to have driven growth in the fourth quarter. Its leadership in 7nm and 3nm chip technologies has been instrumental, offering advanced capabilities to customers in high-demand industries. The 5nm process technology has also contributed to TSM’s wafer revenues, reflecting the solid market adoption of these smaller, more efficient chipsets. Taiwan Semiconductor's strategic focus on ramping up 3nm production while advancing its 2nm development positions it for continued leadership in the semiconductor space.
Taiwan Semiconductor's expansion into high-performance computing (HPC) and smartphone sectors is expected to have bolstered its performance in the to-be-reported quarter. The company’s innovative 3nm Fin Field-Effect Transistor (FinFET) technology, alongside its range of FinFET options (spanning 4nm, 5nm, 6nm and 7nm nodes), has become a key growth driver, particularly in HPC applications. TSM’s advanced FinFET technologies, such as the enhanced 3nm and plus variants of the 4nm and 5nm chips, have helped it maintain strong momentum in the smartphone market.
Taiwan Semiconductor's technological advancements are anticipated to have supported its expansion into automotive, IoT and digital consumer electronics. The adoption of TSM’s multi-project wafer processing service, which helps customers cut costs, is likely to have boosted the company’s top-line growth. This diversification across industries enhances the company’s resilience and offers multiple revenue streams.
However, rising operational costs, especially from its overseas expansion into Arizona, Japan and Germany, are likely to have hurt Taiwan Semiconductor’s gross margin in the to-be-reported quarter. Also, higher electric prices in Taiwan are anticipated to have negatively hurt its profitability in the fourth quarter.
TSM Stock Price Performance & Valuation
Taiwan Semiconductor shares have appreciated 105.8% over the past year, outperforming the S&P 500 index’s rise of 23% and the Zacks Computer and Technology sector’s growth of 30.4%. TSM stock has also outpaced the returns of other major players in the semiconductor space, including Broadcom Inc. (AVGO - Free Report) , Marvell Technology, Inc. (MRVL - Free Report) and Micron Technology, Inc. (MU - Free Report) , which have rallied 102.5%, 74.1% and 20.6%, respectively.
One-Year Price Return Performance
Image Source: Zacks Investment Research
Now, let’s look at the value that TSM offers to its investors at the current levels. Currently, Taiwan Semiconductor is trading at a discount, with a forward 12-month P/E of 23.49X compared with the sector’s 26.61X.
Forward 12-Month P/E Valuation
Image Source: Zacks Investment Research
Investment Thesis for TSM Stock
Taiwan Semiconductor’s aggressive $30 billion capital expenditure in 2024 highlights its commitment to maintaining technological superiority. Its ongoing development of 2nm process technology, promising up to 30% power savings over 3nm chips, is a testament to its focus on efficiency and innovation.
Taiwan Semiconductor is also diversifying into high-growth sectors like automotive and the Internet of Things (IoT). Automotive chips, driven by trends like electric vehicles (EVs) and autonomous driving, now account for 5% of its revenues, while smartphone chips remain a significant 34%. These initiatives position TSM to capture emerging opportunities across industries.
Despite its strengths, Taiwan Semiconductor faces near-term headwinds. Rising operational costs, especially from its overseas expansion into Arizona, Japan and Germany, are a major concern. These new facilities, while strategically important for diversification, are expected to dilute gross margins by 2-3% annually over the next three to five years due to higher labor and utility costs, coupled with lower initial utilization rates.
Higher energy prices in Taiwan, following a 25% electricity hike in 2024, pose additional challenges. Geopolitical tensions, particularly between the United States and China, further cloud the outlook. With significant revenue exposure to China, export restrictions and supply-chain disruptions could pressure Taiwan Semiconductor’s operations.
Final Thoughts: Hold TSM Stock Now
Taiwan Semiconductor’s technological leadership and strategic investments make it a compelling long-term player in the semiconductor space. However, short-term challenges, including rising costs and geopolitical risks, warrant caution. Though the company has a solid track record of beating earnings estimates, it is prudent for investors to hold the stock for now to get more clarity about its near-term prospects.
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TSM Set to Report Q4 Earnings: Buy, Sell or Hold the Stock?
Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) is scheduled to report fourth-quarter 2024 results on Jan. 16.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.16 per share, which implies growth of 50% from the year-ago quarter’s reported number. The estimate has been revised upward by 7 cents over the past 60 days.
Image Source: Zacks Investment Research
Taiwan Semiconductor expects revenues between $26.1 billion and $26.9 billion. The Zacks Consensus Estimate for the same is pegged at $26.38 billion, indicating a rise of 34.4% from the year-ago quarter’s reported actuals.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Taiwan Semiconductor has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 7.9%.
Taiwan Semiconductor Manufacturing Company Ltd. Price and EPS Surprise
Taiwan Semiconductor Manufacturing Company Ltd. price-eps-surprise | Taiwan Semiconductor Manufacturing Company Ltd. Quote
Earnings Whispers for TSM
Our proven model does not conclusively predict an earnings beat for Taiwan Semiconductor this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
TSM has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors to Note Ahead of TSM’s Q4 Results
Taiwan Semiconductor continues to assert its dominance in the semiconductor space, benefiting from a robust industry rebound fueled by the growing prominence of artificial intelligence (AI). The surge in AI-driven applications (in manufacturing and end products) has been a significant catalyst for chipset manufacturers like TSM. The rise of data-centric technologies, especially cloud computing, the Internet of Things (IoT) and the metaverse, has increased the demand for semiconductors, contributing to the company’s business performance in the to-be-reported quarter.
TSM’s consistent investments in next-generation and specialty technologies are likely to have driven growth in the fourth quarter. Its leadership in 7nm and 3nm chip technologies has been instrumental, offering advanced capabilities to customers in high-demand industries. The 5nm process technology has also contributed to TSM’s wafer revenues, reflecting the solid market adoption of these smaller, more efficient chipsets. Taiwan Semiconductor's strategic focus on ramping up 3nm production while advancing its 2nm development positions it for continued leadership in the semiconductor space.
Taiwan Semiconductor's expansion into high-performance computing (HPC) and smartphone sectors is expected to have bolstered its performance in the to-be-reported quarter. The company’s innovative 3nm Fin Field-Effect Transistor (FinFET) technology, alongside its range of FinFET options (spanning 4nm, 5nm, 6nm and 7nm nodes), has become a key growth driver, particularly in HPC applications. TSM’s advanced FinFET technologies, such as the enhanced 3nm and plus variants of the 4nm and 5nm chips, have helped it maintain strong momentum in the smartphone market.
Taiwan Semiconductor's technological advancements are anticipated to have supported its expansion into automotive, IoT and digital consumer electronics. The adoption of TSM’s multi-project wafer processing service, which helps customers cut costs, is likely to have boosted the company’s top-line growth. This diversification across industries enhances the company’s resilience and offers multiple revenue streams.
However, rising operational costs, especially from its overseas expansion into Arizona, Japan and Germany, are likely to have hurt Taiwan Semiconductor’s gross margin in the to-be-reported quarter. Also, higher electric prices in Taiwan are anticipated to have negatively hurt its profitability in the fourth quarter.
TSM Stock Price Performance & Valuation
Taiwan Semiconductor shares have appreciated 105.8% over the past year, outperforming the S&P 500 index’s rise of 23% and the Zacks Computer and Technology sector’s growth of 30.4%. TSM stock has also outpaced the returns of other major players in the semiconductor space, including Broadcom Inc. (AVGO - Free Report) , Marvell Technology, Inc. (MRVL - Free Report) and Micron Technology, Inc. (MU - Free Report) , which have rallied 102.5%, 74.1% and 20.6%, respectively.
One-Year Price Return Performance
Image Source: Zacks Investment Research
Now, let’s look at the value that TSM offers to its investors at the current levels. Currently, Taiwan Semiconductor is trading at a discount, with a forward 12-month P/E of 23.49X compared with the sector’s 26.61X.
Forward 12-Month P/E Valuation
Image Source: Zacks Investment Research
Investment Thesis for TSM Stock
Taiwan Semiconductor’s aggressive $30 billion capital expenditure in 2024 highlights its commitment to maintaining technological superiority. Its ongoing development of 2nm process technology, promising up to 30% power savings over 3nm chips, is a testament to its focus on efficiency and innovation.
Taiwan Semiconductor is also diversifying into high-growth sectors like automotive and the Internet of Things (IoT). Automotive chips, driven by trends like electric vehicles (EVs) and autonomous driving, now account for 5% of its revenues, while smartphone chips remain a significant 34%. These initiatives position TSM to capture emerging opportunities across industries.
Despite its strengths, Taiwan Semiconductor faces near-term headwinds. Rising operational costs, especially from its overseas expansion into Arizona, Japan and Germany, are a major concern. These new facilities, while strategically important for diversification, are expected to dilute gross margins by 2-3% annually over the next three to five years due to higher labor and utility costs, coupled with lower initial utilization rates.
Higher energy prices in Taiwan, following a 25% electricity hike in 2024, pose additional challenges. Geopolitical tensions, particularly between the United States and China, further cloud the outlook. With significant revenue exposure to China, export restrictions and supply-chain disruptions could pressure Taiwan Semiconductor’s operations.
Final Thoughts: Hold TSM Stock Now
Taiwan Semiconductor’s technological leadership and strategic investments make it a compelling long-term player in the semiconductor space. However, short-term challenges, including rising costs and geopolitical risks, warrant caution. Though the company has a solid track record of beating earnings estimates, it is prudent for investors to hold the stock for now to get more clarity about its near-term prospects.