On Monday, Needham, a financial services firm, upgraded the price target for Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) to $210.00 from the previous target of $168.00, while maintaining a Buy rating on the stock.
The firm anticipates that TSMC will increase its revenue growth forecast for 2024 from the previously stated "low- to mid-20s" to "mid- to high-20s." However, the company's capital expenditure (CapEx) target for 2024 is expected to remain fixed at $30 billion.
The analyst from Needham has revised the capital expenditure estimate for 2025 downwards from $40 billion to $34 billion based on recent checks, suggesting that TSMC's initial capacity expansion plan for that year is more conservative than previously estimated. Notably, the checks revealed an absence of expansion plans for 3nm technology in 2025, hinting at a potential increase in the conversion of 5nm to 3nm processes.
TSMC's focus on capital efficiency has been underlined by Needham, with indications that the semiconductor giant will continue this emphasis into 2025. The firm's checks also suggest that TSMC is on track to quadruple its free cash flow from 2023 to 2025, which could lead to greater increases in dividend payouts.
The analyst's note concluded with a positive outlook on TSMC's financial strategies and operational efficiency, reinforcing the Buy rating and raising the price target to $210. This adjustment reflects the firm's confidence in TSMC's growth trajectory and disciplined capital management.
In other recent news, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) has been the focus of several analyst firms adjusting their price targets. Morgan Stanley (NYSE:MS) increased its target for TSMC shares, citing strong demand for Apple (NASDAQ:AAPL)'s AI semiconductors and advancements in wafer pricing.
Bernstein SocGen Group also raised its target, expecting a surge in TSMC's full-year revenue and EPS for 2024 due to high demand in high-end phones and advanced nodes.
Susquehanna upgraded TSMC's price target, highlighting the company's industry leadership in the N3, N4, and N5 semiconductor nodes.
Citi raised its price target for TSMC, reflecting the company's strong market position and anticipated growth in demand for AI GPUs/accelerators and edge AI devices.
TSMC reported mixed Q1 2024 earnings, with a sequential revenue decline but an increase in gross margin. The company's Q2 revenue is forecasted between USD 19.6 billion and USD 20.4 billion, with a gross margin of 51% to 53%.
TSMC's N2 technology is expected to start volume production in 2025, with AI processors predicted to significantly drive revenue growth in the coming years. These are recent developments that investors may find noteworthy.
InvestingPro Insights
InvestingPro data highlights several metrics that align with the positive sentiment expressed by Needham regarding Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM). The company's Price/Earnings (P/E) ratio stands at a stable 31.47, closely matching the adjusted P/E for the last twelve months as of Q1 2024. This stability in valuation suggests that the market has consistent expectations of TSMC's earnings capacity. Additionally, the company's revenue growth for the most recent quarter shows an impressive increase of 16.52%, which could be a reflection of the operational efficiency and growth trajectory mentioned by the analyst.
Despite a slight contraction in revenue growth of -1.56% over the last twelve months, TSMC has demonstrated substantial price performance, with a 6-month total return of 86.1% and a YTD return of 81.16%. This robust performance is also evidenced by the stock's price hovering at 97.12% of its 52-week high. Moreover, the company's commitment to shareholder returns is underscored by a notable dividend growth of 20.31% over the last twelve months. With such metrics in consideration, investors may find TSMC's financial strategies and disciplined capital management to be compelling.
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