The COVID-19 pandemic illustrated how technology is central to everyday life. The semiconductor chip, an important component of today’s technology, forms a key part of tech innovation, often called the fourth industrial revolution. Taiwan Semiconductor Manufacturing Company (TSMC) is leading this industrial revolution from behind the scenes.
TSMC is the largest semiconductor manufacturer in the world with a 58% share in 2020 in the semiconductor sector, commanding a market positioning that is way ahead of its competitors as it manufactures its own chip. The stock has traded between $96.20 and $142.20 in the last 52 weeks, and its share price has risen from $114 to $114.29 in the last month.
The stock price is supported by its robust business model, strong demand and supply constraints that have negatively impacted tech and consumer electronics value chains in Mexico.
Semiconductors are used in the manufacture of various kinds of electronic devices, including diodes, transistors and integrated circuits. Several consumer products in everyday life such as mobile phones, smartphones, digital cameras, televisions, washing machines, refrigerators and LED bulbs also use semiconductors. You may want to invest in semiconductor stocks as a first-time investor or diversify your portfolio. This article explains how to buy Taiwan Semiconductor Manufacturing Company (NYSE: TSM) stock.
How to Buy TSM Stock
Follow these 4 steps to place an order.
Step 1: Pick a brokerage.
Buying stocks is easy, but you need to do some research before taking the plunge. The easiest way to buy stocks is through an online broker. After opening your account, you can buy stocks through the broker’s app in a matter of minutes. Other options include using a full-service stockbroker or buying stock directly from your employer.
It is easy to open and set up a brokerage account. You complete an application for your account and provide proof of identification and funding information. You transfer funds into your brokerage account electronically or by mailing a check.
Step 2: Decide how many shares you want.
You need not complete your entire portfolio all at once. Over time, you can add to the initial shares you buy and begin trading more of the same stock or any number of stocks you choose. New stock investors can consider fractional shares, a relatively new offering from online brokers that allows you to buy a portion of a stock rather than the full share. Fractional shares let you own expensive stocks like Amazon.com Inc. (NASDAQ: AMZN) or Apple Inc. (NASDAQ: AAPL) that trade at $3,500 and $160 respectively.
What that means is you can get into pricey stocks — companies like Google and Amazon that are known for their 4-figure share prices — with a much smaller investment. SoFi Technologies Inc. (NASDAQ: SOFI), Robinhood Markets Inc. (NASDAQ: HOOD) and Charles Schwab Corp. (NYSE: SCHW) are among the brokers that offer fractional shares.
Step 3: Choose your order type.
Choose from 2 basic order types: market orders and limit orders.
With market orders, you purchase or sell stock at the current market price. Your order will probably be executed and filled quickly.
Don't be surprised if the price you pay — or get if you're selling — isn't the same as the one you were given just seconds before. Throughout the day, bid and ask prices move continuously. That's why a market order is appropriate for buying stocks that don't have huge variations in price, such as large, stable blue-chip corporations rather than smaller, more volatile businesses.
You have more control over the price at which your trade is executed when you use a limit order. If X stock is trading at $100 per share, and you believe a price of $95 per share is in line with how you value the firm, your limit order instructs your broker to only execute your order when the price falls to that level.
Step 4: Execute your trade.
An executed trade occurs when a buy or sell order gets filled.
Where to Buy TSM
If you're an active trader aiming to beat the market, you probably already know what you're looking for in a brokerage: minimal fees, premium research, cutting-edge strategy tools and a robust trading platform. Below is a compilation of the best online brokers in a range of categories so you can pick one that meets your needs.
TSM Stock History & Value
In the last 6 months, TSM stock has traded between $108 and $124. Its market capitalization currently stands at $626.012 billion with a price-to-earnings (PE) ratio of 30.37%.
One way of measuring if a stock is overvalued or undervalued is by looking at whether its PE ratio is higher than the growth rate of its earnings. By this measure, TSM is overvalued as its earnings in Q2 and Q3 2021 have risen by 2.8% and 10.7% respectively. This data, in isolation, would imply that the stock is overvalued. TSM stock can be seen as overvalued when you compare it to the PE ratio of its competitors. For example, MediaTek and Samsung have PE ratios of 17.08% and 12.86% respectively. By this measure, TSM is overvalued as its PE ratio is higher.
TSM Stock: What Analysts Are Saying
Some analysts are upbeat about TSM and others are skeptical that its share price reflects its true price. It is always a good idea to look at what other analysts are saying about a stock to better understand how industry professionals are thinking about investments.
Krish Sankar Bear Case
TSM was given a Market Perform rating and a $120 price target by Cowen analyst Krish Sankar, representing an 8% upside. While he believes it has "industry-leading" margins, process technology, execution and market dominance, he sees end demand as "near-term peak-ish." On the shares, he likes a better entry point. Geopolitical threats, increased industry competitiveness and capex are additional causes for caution for TSM stock, Sankar says.
Susquehanna Bancshares Bull Case
TSM stock had its “hold” rating reiterated by equities research analysts at Susquehanna Bancshares in a research note issued to investors. Total foundry services revenue in 2020 was $85.1 billion, and TSMC took 63% of that. Samsung, TSMC’s closest rival, only has a 17% share of the foundry manufacturing industry.
A foundry is a business that operates to fabricate the designs of other companies, such as fabless semiconductor companies. If a foundry does not also produce its own designs, it is known as a pure-play semiconductor foundry.
Pros and Cons of TSM Stock
|Leader in semiconductor foundries
|Might be overvalued
|Over 53% of market share across the world
|Higher price-to-earnings ratio than most of its peers
|Lighter chips than Intel
|Geopolitical risks stemming from China
|Major customers like Apple
Is TSM Stock a Buy, Sell or Hold?
TSM gets a hold rating because of its position as one of the only foundry semiconductor manufacturers. It has a hold rating from most analysts and a larger market share than Samsung, its closest rival. TSMC is inevitably going to play a role in the transition to the fourth industrial revolution. It has a strong rating from many analysts, and the PE ratio suggests that investors are optimistic about the stock.
Frequently Asked Questions
Which stock exchanges is TSM traded on?
TSM shares were listed on the Taiwan Stock Exchange (TWSE) on Sept. 5, 1994, under TWSE code “2330.” TSMC’s American Depositary Shares (ADS) were listed on the New York Stock Exchange (NYSE) under the ticker symbol “TSM” on October 8, 1997.
What is the TSMC stock code on Bloomberg and Reuters?
TSMC’s stock code is “2330.TT” for Bloomberg and “2330.TW” for Reuters.
About Henri Kouam
Henri Kouam is an economist and machine learning enthusiast. He currently builds Machine Learning models to help clients across Europe forecast a range of asset classes such as cryptocurrencies while working with, the Nkafu Policy Institute, an African-based think tank to help inform economic policy. He equally works as a consultant for NY-based ”Global Wonks”, where he has named wonk of the week twice due to his actionable intelligence on North America.