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This Company Is Winning From Apple, Analyst Notes

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In a report published Monday, JPMorgan analysts maintained an Overweight rating on Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), while reducing the price target from NT$175 to NT$165. The reason for the downgrade was cited as the stock's valuation.

In the report JPMorgan cited the key takeaways from the company's 1Q15 earnings call as:

  1. Deeper-than-expected inventory correction - resulting in 7-8 percent q/q decline of 2Q15 revenues
  2. Correction likely to end by late 2Q - sets the stage for a strong 2H15 pickup
  3. Capex lowered by $1bn due to faster conversion of 20nm to 16nm and more efficiency in 28nm
  4. Confirming much faster 16nm ramp-up speed - mainly on account of market share gains from Apple Inc (NASDAQ: AAPL)

"TSMC confirmed that 16nm ramp up in 2H15 would be much faster than initially expected, primarily due to winning back share in Apple A9, in our view. We expect 16nm to account for 15% of TSMC’s revenues in 4Q15. This should also alleviate concerns about competitive positioning vs. Samsung and Global Foundries. We expect TSMC's competitive positioning to be further strengthened at the 10nm node from 2017," the analysts said.

The analysts expect a pullback of about 10 percent in the stock in the near term, reflecting the weakness in 2Q15. Orders are expected to bottom in May-June, "setting the stage for a strong recovery in 2H15."

The EPS estimates for FY15 and FY16 have been reduced from NT$12.38 to NT$12.13 and from NT$13.08 to NT$12.78, respectively.

Latest Ratings for TSM

DateFirmActionFromTo
Jan 2018HSBCUpgradesBuyBuy
Nov 2017Morgan StanleyDowngradesOverweightEqual-Weight
Oct 2016Pacific CrestUpgradesUnderweightSector Weight

View More Analyst Ratings for TSM
View the Latest Analyst Ratings

Posted-In: JPMorganAnalyst Color Price Target Reiteration Analyst Ratings

 

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