TSM Faces Short-Term Volatility Amid Regulatory Concerns, Long-Term Growth Potential Remains Intact

StockInvest.us, 2 weeks ago

Taiwan Semiconductor Technical Analysis

Taiwan Semiconductor Manufacturing Company Limited (TSM) closed at $194.68 on October 28, 2024, experiencing a significant 4.31% drop, noting the day's volatility with a low of $194.52 and a high of $199.74. Despite the daily decline, TSM remains well above the 50-day moving average of $178.25 and the 200-day moving average of $154.76, indicating a longer-term positive trend. The RSI (Relative Strength Index) at 57 suggests the stock is neither overbought nor oversold, positioning itself in a neutral stance. The MACD (Moving Average Convergence Divergence) at 7.81 supports bullish sentiment, although the recent decline warrants cautious observation. Key support is identified at $155.39, and resistance at $200.78 is a level to watch, as it will be indicative of whether the stock can regain ground shortly.

Fundamental Analysis

TSM's current PE ratio of 34.52 reflects its growth prospects, albeit at a high multiple, which suggests premium pricing relative to earnings. The EPS at $5.64 points to profitable operations. However, the recent market cap of $825.09 billion highlights the company's significant valuation. The DCF valuation at $66.02 indicates that the current market price may be overvalued based on cash flow projections. The dividend yield of 0.25% is modest, offering limited appeal for income-focused investors. News about halted shipments to a Chinese chip designer and trade breach issues could create headwinds if regulatory concerns materialize. However, TSM's strategic moat as a leading semiconductor maker sustains its position despite these challenges.

Taiwan Semiconductor Short-term and Long-term Predictions

For the next trading day, TSM may experience continued volatility as traders digest recent news events concerning China. It's plausible the stock could see slight recoveries if investors reassess the potential impact of trade breaches. Over the coming week, movements towards the resistance level at $200.78 are possible if the sentiment stabilizes post-news reactions.

In the longer term, TSM's dominant role in semiconductor manufacturing and its innovation-driven approach position it well, despite short-term policy challenges. However, considering the intrinsic value assessment and high PE ratio, the current stock price does seem elevated, pointing towards potential corrections or a phase of consolidation before significant upward movement is justified.

Overall Evaluation

Based on the current analysis, TSM positions more aptly as a 'Hold' candidate. The elevated risk from geopolitical and regulatory factors in the chip sector paired with potential market overvaluation implies caution. However, the company's robust market position and technological edge keep long-term growth prospects intact, supporting maintaining a position rather than aggressive accumulation or reduction.

Check full Taiwan Semiconductor forecast and analysis here.