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TSMC Analysis: Short-term Bullish Momentum, Long-term Caution Invaluable

StockInvest.us, 1 month ago

Taiwan Semiconductor Technical Analysis

Taiwan Semiconductor Manufacturing Company Limited (TSMC), trading under the ticker TSM, closed on May 17, 2024, at $151.68, down $0.55 (-0.36%). The trading range for the day extended from a low of $150.84 to a high of $154. The stock's resistance is noted at $151.95, with a support level at $149.20. TSM's 50-day moving average stands at $140.67 while the 200-day moving average is significantly below at $111.35, indicating a bullish trend. The Relative Strength Index (RSI14) is at 67, slightly touching overbought levels. The MACD (3-month) value of 1.67 suggests a positive momentum, and the Average True Range (ATR), measuring volatility, is at 2.82.

Considering these indicators, TSM is trading within an upward consolidation phase close to its resistance, hinting at potential short-term bullishness. Volumes were lighter at 7.68 million compared to the average of 15.29 million, suggesting a lack of strong trading activity.

Fundamental Analysis

TSMC's market cap stands at $673.26 billion, making it a significant player in the semiconductor industry. The recent news flow emphasizes the critical role of semiconductor companies like TSMC amidst the ongoing AI revolution. As the largest semiconductor foundry globally, TSM is well-positioned to benefit from rising AI demand.

The company maintains an EPS of 5.23 with a P/E ratio of 29, reflecting healthy profitability but somewhat rich valuation. The forward-looking price targets show a consensus bullish outlook with a median target of $168, a high of $180, and a low of $125. Analyst sentiment shows strong confidence in the stock with 10 buy ratings and 1 hold rating.

Despite its strong market positioning, the intrinsic value calculation based on DCF is notably lower at $64.22, suggesting that the stock might be overvalued at its current trading levels. The low dividend yield of 0.24% does not add significant income, implying that TSM is more suited for capital gains than dividend income.

Taiwan Semiconductor Short-term Prediction

For the next trading day (May 20, 2024), the price is likely to test its resistance at $151.95. Should it break past this level, the stock could see further upside. However, the support at $149.20 provides a cushion, making a significant dip less likely unless negative news impacts the sentiment.

Over the upcoming week, given the earnings announcement on May 27, 2024, and depending on the results, TSM might experience increased volatility. A positive earnings surprise could propel the stock higher, potentially testing the year high of $158.40, whereas a miss might bring it closer to the stop-loss level of $144.76.

Intrinsic Value and Long-term Investment Potential

The intrinsic value of TSM, calculated at $64.22, significantly undercuts the current market price, indicating a potential overvaluation by the market possibly due to anticipated growth from the AI boom. The high P/E ratio and substantial market cap are reflective of premium pricing based on future growth prospects rather than current earnings.

Given TSM's fundamental strengths, dominant market position, and pivotal role in the semiconductor and AI industry, it holds substantial long-term investment potential. However, investors should be mindful of valuation metrics and broader market conditions impacting the semiconductor industry.

Overall Evaluation

Based on comprehensive technical and fundamental factors, TSM is categorized as a 'Hold' candidate. While the short-term technical indicators suggest potential bullish momentum, the intrinsic value and fundamental analysis suggest a cautious approach due to overvaluation concerns. Long-term growth prospects driven by AI demand provide a positive outlook, but current market conditions and valuation levels necessitate a balanced perspective.

Check full Taiwan Semiconductor forecast and analysis here.