On Thursday, Needham reiterated a Buy rating and a $168.00 price target for Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM), following the company's recent guidance update. The semiconductor giant has projected its second-quarter performance to surpass analysts' expectations.
Despite the recent earthquake, TSMC anticipates recovering production losses within the second quarter of 2024, rather than the third quarter as previously anticipated.
TSMC has demonstrated its resilience and reliability as a semiconductor supplier, with the management's effective response to the natural disaster underscoring its operational strength. In addition to overcoming the earthquake's challenges, TSMC provided several updates.
The company announced that the revenue ramp for its N2 technology is now officially scheduled for 2026, a year later than initially planned.
Furthermore, TSMC has extended its forecast for a 50% compound annual growth rate (CAGR) in AI revenue up to 2028, with expectations that AI will constitute 20% of the company's total revenue by that year. In a strategic move, TSMC hinted at potential price increases in the near future, which could impact its revenue streams.
While TSMC has revised its outlook for the broader semiconductor and foundry industries downward, it has maintained its own performance outlook, indicating confidence in its business model and market position. The company also signaled that smartphone revenue is likely to decline for an additional quarter, with a slower-than-anticipated recovery trajectory.
In a notable shift, TSMC reversed its previous forecast for the automotive sector, now expecting no growth in 2024. This adjustment reflects changing market conditions and demand patterns.
Despite these revisions, TSMC affirmed its capital expenditure (CapEx) guidance, maintaining its planned investment range of $28-32 billion. This investment is crucial for TSMC's future growth and its ability to meet the evolving demands of the semiconductor industry.
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