TD Cowen, a prominent investment firm, has advised potential investors to exercise caution before purchasing shares in Taiwan Semiconductor Manufacturing (TSM). In a recent report, analyst Krish Sankar reiterated his Market Perform rating for TSMC stock and maintained his price forecast of $85 for TSMC’s American depositary receipts.
Sankar believes that the current prices do not offer significant upside potential in the near term and suggests waiting for a more favorable entry point. He identifies softer than expected Android mobile demand and a possible slowdown in the automotive chip industry as key risks that could impact TSMC’s revenues.
On Monday, TSMC stock experienced a slight decline of 0.3%, closing at $104.78. However, it is noteworthy that the stock has already witnessed a staggering 40% increase this year.
Sankar predicts that TSMC’s third-quarter revenue will grow by 10% quarter-over-quarter. While this growth projection falls slightly below the 15% average of the past five years, it is important to consider the current inventory glut for mobile smartphone chips that has yet to dissipate.
TSMC holds a dominant market position in high-end chips, manufacturing main processors for Apple iPhones, Qualcomm mobile chipsets, and processors developed by Advanced Micro Devices. TrendForce reports that TSMC holds approximately 60% of the market share for third-party chip manufacturing, with Samsung trailing at 12%.
The upcoming second-quarter earnings report by TSMC, scheduled for Thursday, is expected to shed light on various crucial aspects. Sankar believes that the earnings call will focus on the sustainability of data center AI server build-outs, inventory levels in the mobile supply chain, and trends within the automotive end market.
In conclusion, TD Cowen advises potential investors to exercise patience and await better buying opportunities in regard to shares of Taiwan Semiconductor Manufacturing. The company’s upcoming earnings report will provide valuable insights into the factors that will influence future performance.
