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TSM Stock Analysis: Strong Gains Fuel Optimism, Hold for Future Potential

StockInvest.us, 2 weeks ago

Taiwan Semiconductor Technical Analysis

Taiwan Semiconductor Manufacturing Company (TSM) closed at $162.92 on June 05, 2024, reflecting a substantial gain of 6.85% ($10.45). The stock hit a year high of $163.71 and a low of $157.95 for the trading day. The observable momentum aligns with the RSI14 value of 60, indicating a bullish trend but not overbought territory. High trading volume of 21.81 million compared to the average of 15.13 million suggests heightened market interest.

The 50-day and 200-day moving averages at $144.05 and $114.72, respectively, emphasize a strong uptrend. The MACD (3-month) of 7.404217 further reinforces bullish momentum. Noteworthy is the support level at $149.2, suggesting robust market confidence given it trades above this level.

For the next trading day and upcoming week, TSM is anticipated to exhibit continued positive momentum. However, with an ATR of 2.91, price swings within this range should be expected, and the $156.72 stop-loss presents a critical threshold to monitor.

Fundamental Analysis

TSM's market capitalization stands at $718.06 billion, positioning it as a semiconductor industry titan. The recent stock surge is fueled by analyst upgrades and optimism surrounding semiconductor equipment orders from China, suggesting a bolstered revenue stream.

EPS of $5.17 and a PE ratio of 31.51 are within industry norms, indicating fair valuation. The upcoming earnings announcement on July 18, 2024, could further influence stock movement depending on performance metrics.

Taiwan Semiconductor Despite a modest dividend yield of 0.23%, the company's dividends scheduled for June 11, 2024, could attract income-focused investors. Analysts' price targets range between $125 and $180 with a consensus at $157.67, justifying the current price trajectory. Importantly, market sentiment is predominantly bullish with 10 buys and 1 hold.

The company’s involvement in the AI revolution positions it for sustained demand growth. Additionally, news of advanced chipmaking machines from ASML enhances long-term competitive edge.

Intrinsic Value and Long-term Investment Potential

The discounted cash flow (DCF) calculation pegs TSM’s intrinsic value at $64.47, significantly below its market price, hinting at potential overvaluation in the near term. Long-term prospects, however, are reinforced by enduring demand for high-performance chips integral to AI and other technologies.

Recent news supporting enhanced production capabilities and broadened market applications underscores TSM's strategic advantage. These factors suggest that despite current overvaluation concerns based on DCF, the stock holds substantial growth potential.

Overall Evaluation: HOLD

TSM is categorized as a 'Hold' candidate. The stock’s robust technical indicators coupled with strong fundamental underpinnings affirm that the bullish trend might continue. However, the DCF indicates a discrepancy between intrinsic and market values, advising caution. Holding the stock allows for benefiting from short-term gains while monitoring for any substantial market corrections.

Check full Taiwan Semiconductor forecast and analysis here.