Taiwan Semi's Monopoly Help It Defy Industry Downcycle, Bullish Analyst Predicts 38% Potential Upside

  • Needham analyst Charles Shi reiterated a Buy on Taiwan Semiconductor Manufacturing Company Ltd TSM and a $110 price target as he thinks the stock is in the bottoming process.
  • Shi's recent conversations with investors suggest the buy-side consensus for TSMC's 2023 revenue growth rate is now ~5%, down from ~10% around two months ago. 
  • In this report, Shi revisits assumptions on TSMC's capacity, utilization, ASP, and CapEx to stress-test his numbers. 
  • The analyst concludes that a mid-teen revenue growth and MSD EPS growth are achievable for TSMC despite the cyclical headwinds ahead. 
  • Shi writes that TSMC's near-monopoly position in 5nm and 3nm, likely to ramp meaningfully in 2023, will help the company defy the industry's down cycle. 
  • Daiwa analyst Rick Hsu upgraded TSMC to Buy from Outperform with a price target of NT$645, up from NT$550. 
  • Hsu sees revenue growth in 2023 for the company despite an "industry-wide correction." 
  • The analyst raised estimates on TSMC's share gains and pricing power. 
  • Hsu sees TSMC's revenue "as likely counter-cyclical, thanks to its advanced-tech dominance leading to order-share gain and pricing power to help minimize price erosion."
  • Price Action: TSM shares traded higher by 0.75% at $79.41 on the last check Wednesday.
  • Photo via Wikimedia Commons
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