On Tuesday, BofA Securities maintained a positive outlook on shares of Taiwan Semiconductor Manufacturing Co. Ltd. (2330:TT) (NYSE: TSM), reiterating a Buy rating and a price target of NT$1,200.00.
The firm's analyst highlighted the upcoming delivery of a high-numerical aperture extreme ultraviolet (EUV) lithography tool to TSMC from ASML (AS:ASML). This tool, expected to arrive later this month, is set to be installed at TSMC's Global R&D center in Hsinchu, Taiwan, and is anticipated to enhance the company's capabilities in developing advanced semiconductor processes.
The acquisition of the advanced EUV lithography tool by TSMC is seen as a positive development for the company's technology roadmap. According to the analyst, this should not significantly affect TSMC's gross profit margin (GPM) and cash flow in the near term.
The news of TSMC's technological advancement comes alongside the company's financial report for August, which showed a revenue of NT$251 billion. This figure represents a 2% decrease month-over-month but a 33% increase year-over-year.
The revenue reported for August, coupled with the previous month's performance, accounts for 68% of BofA Securities' third-quarter estimates for 2024. The analyst noted that TSMC is on track to meet or exceed its guidance for the quarter. The firm also finds TSMC's valuation compelling, citing a 16x expected price-to-earnings (P/E) ratio for the year 2025.
TSMC, a leading player in the semiconductor industry, is expected to further solidify its position with the integration of the high-NA EUV lithography tool into its research and development efforts. This move is particularly noteworthy as it reportedly places TSMC ahead of its competitor, Samsung (KS:005930), in receiving this advanced equipment.
The affirmation of the Buy rating and the NT$1,200.00 price target by BofA Securities underscores the firm's confidence in TSMC's growth prospects and its strategic investments in technology that are expected to drive the company's future success in the semiconductor market.
InvestingPro Insights
As Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) gears up to enhance its technological capabilities with the new EUV lithography tool, the company's financial health remains robust. With a market capitalization of $724.09 billion and a forward-looking P/E ratio of 25.25, TSMC stands as a heavyweight in the semiconductor industry.
The company's revenue growth of 9.44% in the last twelve months as of Q2 2024, coupled with a significant quarterly revenue growth of 40.07% in Q2 2024, underscores its strong performance and potential for continued expansion.
Investors may also take note of TSMC's gross profit margin, which sits at a healthy 53.36%, reflecting efficient operations and strong pricing power in the market. Moreover, the company's return on assets of 16.56% indicates effective use of its assets in generating profits.
These metrics, along with a dividend yield of 1.2% and a substantial dividend growth of 23.0% in the last twelve months as of Q2 2024, paint a picture of a company that is not only growing but also returning value to its shareholders.
For those looking to deepen their analysis, InvestingPro offers additional insights, including tips that may provide further clarity on TSMC's financial position and future performance. Currently, InvestingPro lists several more tips for investors considering TSMC in their portfolios.
The InvestingPro Fair Value estimate of $156.72 USD, alongside an analyst target of $214 USD, suggests room for potential upside. These figures, combined with TSMC's strategic technological advancements, may offer investors a compelling case for considering this semiconductor leader in their investment decisions.
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