Bernstein believes investors should look through any immediate hiccups and focus on Taiwan Semiconductor Manufacturing Company’s robust long-term fundamentals.
On Monday, analyst Mark Li reiterated his Outperform rating on
) and said it was the “Top Pick” under his coverage.
“While some may focus on the correction in 1Q23 and macro uncertainties in the short term, we recommend investors stay patient,” he wrote.
The company is the world’s largest third-party foundry, dominating the market for high-end chips, including the main processors inside Apple’s (
The analyst lowered his price target for TSMC shares to $750 Taiwan dollars from $850 Taiwan dollars due to rising interest rates. The new forecast represents about 50% upside from current levels in TSMC’s American depositary receipts. He said TSMC’s forward price-to-earnings ratio of about 13 times is attractive for a company he projects will grow its earnings at 24% annual rate over than next two and a half years.
Though Li expects sales in the first quarter of next year to be slightly below expectations as demand for Android smartphones and computers deteriorates, he estimates business will improve starting in the second quarter with earnings growth accelerating in 2024.
Taiwan accounts for more than 90% of the world’s most advanced chip manufacturing, with South Korea at 8%, according to a report from the Semiconductor Industry Association and the Boston Consulting Group last year. Most of the capacity comes from TSMC, which was established in 1987 and has pioneered the business model of making chips for external customers.
Write to Tae Kim at [email protected]