TSM Stock Analysis: Bullish Momentum and Long-Term Growth Opportunities

Technical Analysis

Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) closed at $168.16 on June 10, 2024, up 2.29% from the previous trading day. The stock's recent performance showcased significant strength, touching a year high of $169.84 within its intraday range of $162.42 to $169.84. The Relative Strength Index (RSI14) currently stands at 69, indicating that TSM is nearing overbought territory.

The 50-day moving average (MA) at $146.16 and the 200-day MA at $116.16 reveal a strong uptrend in the stock's movement, with the price well above both averages. The Moving Average Convergence Divergence (MACD) over the past three months recorded at 6.39 highlights bullish momentum.

Given the Average True Range (ATR) of 2.88, the stock is experiencing moderate volatility, and the defined support is around $139.02, effectively underpinning the stock price. Lack of immediate resistance suggests potential room for further upward movement in the short term.

Prediction for the Next Trading Day and Upcoming Week

Given the recent upward momentum, TSM is likely to open strongly on June 11, 2024. The combination of positive technical indicators and recent news boosts sentiment around TSM's stock. However, investors should keep an eye out for corrections since the RSI suggests overbought conditions. The stock might test its recent high of $169.84 again, potentially moving towards the target high of $180 within the next trading week if bullish sentiment continues.

Fundamental Analysis

Fundamentally, TSM remains robust with a market capitalization of approximately $689.81 billion. The stock’s P/E ratio of 31.89 suggests that it is trading at a premium compared to the general market, though within range for major tech/AI stocks. TSM's EPS of 5.19 reflects solid earnings performance.

The company's upcoming earnings announcement on July 18, 2024, is critical, given the significant interest around semiconductor stocks spurred by AI investments. TSM's involvement as a foundry partner for Nvidia and broad customer exposure reinforces a positive outlook.

Current dividends yield at 0.26% might not be particularly enticing for dividend-focused investors; however, steady dividend payments bolster investor confidence in TSM’s long-term financial health.

Intrinsic Value and Long-Term Investment Potential

TSM's discounted cash flow (DCF) analysis yields a value of $63.65, indicating the current price may be fundamentally overvalued in quantitative terms. However, intrinsic value considerations should account for TSM’s industry position, technological advancements, and future growth prospects, particularly in AI and semiconductor sectors.

The company's market leadership, strong demand for advanced chips, and strategic client base including industry giants like Nvidia, create substantial long-term growth potential. Concerns over Taiwan's energy issues present a risk factor but have not significantly impacted TSM’s performance so far.

Overall Evaluation

Based on the collected data and recent performance, TSM shows strong short-term bullish and long-term growth potential. Despite some overvaluation indicated by DCF, the stock’s industry position and solid performance metrics, along with analyst sentiment leaning towards a 'Buy,' TSM can be categorized as a 'Buy' candidate. This conclusion derives from its technical strength, robust market presence, positive growth outlook, and consistent earnings performance aligned with broader AI momentum. However, potential investors should remain aware of geopolitical and energy-related riskspertaining to Taiwan's situation.