Why TSMC Shares Are Rallying Despite Lackluster Q1 Guidance

Why TSMC Shares Are Rallying Despite Lackluster Q1 Guidance

Shares of Taiwan Semiconductor Manufacturing Company Limited TSM were advancing in premarket trading on Thursday.

What Happened: The Hsinchu, Taiwan-based company reported fourth-quarter earnings that beat expectations despite a revenue miss.

More importantly, the company guided to below-consensus first-quarter revenue, citing continued end-market weakness and inventory correction.

The positive stock reaction is attributable to the company’s comments on the earnings call.

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Needham analyst Charles Shi noted that TSMC expects low-single-digit earnings growth for 2023, implying a revenue bottom in the second quarter.

The company also reduced its 2023 Capex guidance to $32 billion-$36 billion and called for a narrowing of margins amid a rise in R&D expenses, the analyst said. N7 utilization to only mildly recover in 2023, he said, citing the company. 

“We believe TSMC’s 2023 revenue guidance is within or slightly above buy-side expectations," Shi said.

Price Action: In premarket trading on Thursday, TSMC shares rose 1.97%, to $83.39, according to Benzinga Pro data.

Posted In: EarningsLong IdeasNewsPre-Market OutlookTechTrading IdeasCharles ShichipsEarnings CallNeedhamsemiconductors