Sign InSummary
Taiwan Semiconductor Manufacturing Company Limited (TSM) is predicted to rebound based on strong fundamentals, supportive news, and analyst opinions, making it a potential Buy with a high target price and a favorable discounted cash flow (DCF) value. (Analysis date: July 20, 2023)
Stock Overview
The stock in focus is Taiwan Semiconductor Manufacturing Company Limited (TSM), which is listed on the New York Stock Exchange (NYSE). As of the last close on July 20, 2023, its price stood at $97.86 with a change of -5.20 (-5.05%). The stock has oscillated between a low of $97.05 and a high of $100.41 within that trading period. Meanwhile, its 52-week high and low are $110.69 and $59.43 respectively.
Market Positioning
TSM has an immense market capitalization of $507.54 billion, with roughly 5.19 billion shares outstanding. Yet, of particular concern is the trading volume for the last closed session, which significantly surpassed the average trading volume—21.53 million shares against an average of 11.79 million shares. This reflects increased trader interest in the stock.
Technical Analysis
The 50-day moving average of TSM stands at $98.45, slightly higher than the current trading price. The 200-day moving average is registering at $85.96, revealing that the stock's present price is higher compared to the median price in the past 200 days, indicating a bullish trend.
Interestingly, the MACD (3-month) stands at -0.75, implying potential selling pressure in the medium term. Additionally, the Relative Strength Index (RSI-14) is at 43, signaling neither extreme buying nor selling pressure.
Fundamental Analysis
TSM's EPS of $6.19, along with its PE of 15.81, reflect a company that is generating satisfactory profits—a crucial determinant for many investors.
Moreover, the company cut its annual outlook for revenue in 2023 and postponed the start of production at its flagship Arizona project until 2025. However, analysts hint at an outsize growth opportunity for TSM, even as it witnessed a profit decline for the first time in four years.
Forecasts
The discounted cash flow (DCF) value for TSM stands at $356.79, indicating considerable potential for growth compared to the current price. Furthermore, consensus targets for TSM's stock price are high, with median, low, and high forecast values at $125, $118, and $135 respectively.
News Impact
Multiple news items suggest potential bottoming out and turnaround opportunities for TSM. For example, an analyst from Needham & Company attests that we may be close to the bottom for TSM, highlighting a possible buying opportunity.
Stock Predictions
Given the technical and fundamental analysis, along with opinions from analysts and the news, TSM seems slated for a rebound. For the next trading day on July 21, 2023, TSM is expected to open higher. For the upcoming week, the stock is slated to steadily recover ground, primarily driven by its sound fundamentals and supportive news.
Final Evaluation
Knee-jerk reactions are common in the stock market, and the recent bruise TSM felt may not signify a trend. On weighing the available evidence, the stock is categorised as a "Buy". This is because of its strong fundamentals, analysts' high target prices, high DCF value, and the belief that the stock may have hit, or is very close to hitting, its bottom. Savvy investors aiming for long-term profitability while taking into account occasional market volatilities may find TSM a worthwhile consideration.
