TSMC Faces Bearish Pressure Amid Oversold Conditions and Strong Fundamentals: What's Next?

Technical Analysis

TSMC's recent price action reflects significant bearish sentiment, with the stock closing at $172.97 after a steep decline of 4.19%. This marks a move well below both the 50-day moving average of $203.99 and the 200-day moving average of $183.27, suggesting strong downward momentum. The RSI14 at a low 16 indicates the stock is heavily oversold and could be primed for a short-term rebound. However, the MACD of -4.43 supports a continuing downtrend. Volume was notably higher than average, confirming the intensity of the sell-off. With no definite support levels established and resistance at $192.31, the near-term outlook remains volatile.

Fundamental Analysis

Fundamentally, TSMC remains robust with a market cap of $897 billion and a PE ratio of 25.07, suggesting it is fairly valued relative to the industry. The annual EPS of $6.90 reflects TSMC's strong profitability. The announcement of a $100 billion investment in U.S. chip manufacturing endeavors highlights TSMC’s commitment to expansion, although it introduces risks related to increased capital expenditures. The dividend yield based on TTM is 1.13%, providing modest income support.

Despite current pressures, Taiwan's review of TSMC’s U.S. investment suggests careful strategic planning for sustainable growth. This aligns with the broader geopolitical significance of maintaining Taiwan's leadership in the semiconductor sector.

Stock Performance Prediction

For the next trading day, market participants might expect a minor recovery due to the oversold RSI, though caution is warranted given the absence of firm support levels. Throughout the week, if the selling pressure persists, the stock could test new lows barring any positive developments. Volatility remains a key factor given the high ATR of 4.31.

Intrinsic Value and Long-term Potential

The discount cash flow calculation at approximately $22.46 per share indicates significant undervaluation in terms of cash generation potential. However, market valuation, geopolitical risks, and execution on the U.S. investment strategy could alter intrinsic perceptions. Over the long term, TSMC’s strategic investments may solidify its leadership in global semiconductors but bear monitoring for execution risks.

Overall Evaluation

The analyst community's consensus is currently classifying TSMC as a 'Buy'. Given the technical oversold condition and fundamental strength, it may be categorized as a 'Hold' for conservative investors seeking to gauge resolution of current uncertainties and awaiting clearer signals of stabilization or reversal in price trends. Longer-term investors could consider waiting for more clarity on the impact of the extensive U.S. investment plan before reassessing their positions.