TSM Technical and Fundamental Analysis Points to Strong Potential

StockInvest.us, 1 month ago

Taiwan Semiconductor Technical Analysis

Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) closed on June 07, 2024, at $164.39, marking a 1.43% increase from the previous close. The stock achieved an intraday high of $166.12, establishing a new 52-week high, with a low of $161.96. The market cap stands at $694.84 billion with a trading volume of 13.99 million, slightly below the average volume of 14.83 million, suggesting a typical trading day.

The Relative Strength Index (RSI14) is measured at 67.0, approaching overbought territory but not yet extreme, indicating potential for more upside if demand persists. The 50-day moving average ($144.96) and the 200-day moving average ($115.43) both exhibit a bullish momentum. The MACD (3-month) is 6.78, reinforcing a positive trend. The Average True Range (ATR) at 2.83 indicates moderate volatility, with a conditional alert level marked by the stop-loss at $159.20.

Fundamental Analysis

Taiwan Semiconductor's earnings per share (EPS) of $5.19 and a price-to-earnings (PE) ratio of 31.67 reflect strong profitability but also suggest the stock is relatively expensive compared to industry norms. The upcoming earnings announcement on July 18, 2024, could be a key catalyst.

Recent news reports indicate robust sales driven by AI chip production and a resurgence in PC demand, suggesting that TSM is capitalizing effectively on prevailing technology trends. Additionally, industry analyses positioning TSM among undervalued semiconductor stocks and top growth stocks bolster confidence in its trajectory.

Despite its current dividend yield of 0.23%, which is relatively modest, it remains attractive for growth-oriented investors focusing on capital appreciation rather than income. The discounted cash flow (DCF) valuation at $63.73, significantly lower than the market price, suggests potential overvaluation.

Analyst consensus ratings show a strong inclination towards 'Buy' with 10 'Buy' ratings, 1 'Hold', and no 'Sell'. The target prices indicate potential gains with a median target of $168, a low of $125, and a high of $180.

Taiwan Semiconductor Short-term Performance Prediction

For the next trading day, June 10, 2024, TSM is likely to continue its upward trend owing to strong recent news and positive market sentiment. Short-term resistance appears to be limited, though technical indicators suggest monitoring the RSI for any overbought signals.

Looking into the upcoming week, expect TSM to oscillate within a range close to its recent high if market conditions remain favorable and no adverse news emerges.

Intrinsic Value and Long-term Investment Potential

The intrinsic value derived from the DCF model at $63.73 indicates that TSM may be overvalued at its current market price. However, long-term investment potential remains robust given the company's leading position in semiconductor manufacturing, positive industry trends, and expanding markets due to AI and PC demand.

Overall Evaluation

Evaluation: Hold

Although TSM's current market price shows signs of overvaluation based on DCF analysis, the momentum from favorable industry dynamics, strong historical performance, and positive analyst ratings suggest that holding could be beneficial. For medium to long-term investors, TSM's growth potential in the booming semiconductor market presents a compelling case, while current price levels and technical indicators suggest cautious optimism.

Check full Taiwan Semiconductor forecast and analysis here.