Sign InTaiwan Semiconductor (TSM) Technical and Fundamental Analysis: A 'Hold' Amidst Volatility
Summary
As of July 17, 2024, Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) experienced a significant drop of 7.98% to close at $171.20, yet its robust fundamentals and dominant market position suggest strong long-term growth potential despite short-term geopolitical risks, making it a prudent 'Hold' according to recent analysis.
Technical Analysis
Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) last closed at $171.20 on July 17, 2024, experiencing a significant drop of 7.98% (-$14.84). This decline has brought the stock closer to its recent price low of $170.51. The decline places TSM below its recent resistance level of $175.38, while the support level is at $162.92. The RSI stands at 49, indicating a neutral position but closer to the oversold territory, suggesting that there might be a potential buying opportunity soon.
The stock's 50-day moving average is $165.01, while the 200-day moving average is $126.67, illustrating that the stock is in an overall uptrend in the long term despite recent volatility. The MACD is positive at 5.52, supporting the bullish longer-term outlook. The Average True Range (ATR) of 3.92 indicates relative volatility, which should be considered in short-term trading strategies.
Fundamental Analysis
Taiwan Semiconductor Manufacturing Company's fundamentals remain robust. As of July 17, 2024, the company has a market cap of $838.04 billion, and reported earnings per share (EPS) of $5.15, leading to a price-to-earnings (P/E) ratio of 33.24, which is relatively high but justifiable considering the growth prospects in the semiconductor industry.
The company's anticipated earnings announcement on July 18, 2024, is expected to confirm a 30% increase in Q2 profits bolstered by strong AI chip demand. This corroborates an optimistic earnings outlook. However, political tensions and potential AI chip export restrictions to China could pose short-term risks.
The Dividend Yield stands at 0.29%, reflecting a primary focus on growth rather than income. Moreover, the company has a low DCF valuation of 64.29, indicating the current stock price might be overestimated when considering future cash flows.
Stock Performance Predictions
For the next trading day, July 18, 2024, expect volatility driven by the earnings report. Positive results could provide a boost above the resistance level of $175.38, whereas any unfavorable updates regarding political risks could push the stock towards its support level of $162.92.
For the upcoming week, stock performance will likely be influenced by post-earnings reactions and geopolitical developments. This includes any further details on AI chip export restrictions to China. Investors should brace for potentially sharp movements in either direction.
Intrinsic Value and Long-term Investment Potential
Despite a high P/E ratio, TSM's dominant position in the semiconductor industry and its steady revenue growth from AI chip demand hint at intrinsic value appreciation over time. The consensus target median price of $184 indicates potential for price appreciation, while expert ratings suggest confidence with nine analysts calling it a 'buy'. The company's ability to leverage its market dominance and technological advancements presents a strong case for long-term growth despite current political uncertainties.
Overall Evaluation
The discrepancy between immediate geopolitical risks and the robust long-term fundamentals characterizes TSM as a 'Hold' candidate. While the stock demonstrates resilience and significant growth potential, short-term political uncertainties warrant caution. Investors should closely monitor geopolitical developments while capitalizing on potential post-earnings upside.
In conclusion, Taiwan Semiconductor Manufacturing Company Limited maintains strong long-term potential despite immediate external pressures, making it a prudent 'Hold' for the current period.
