Sign InTSMC Faces Decline Amid Geopolitical Tensions; Analysts Suggest 'Hold' with Upside Potential
Summary
As of November 13, 2024, TSMC's stock closed at $186.74 after a 2.60% decline, exhibiting technical signs of potential stabilization despite high valuations and geopolitical challenges, prompting a cautious Hold recommendation for long-term investors eyeing future growth in the semiconductor industry.
Technical Analysis
Taiwan Semiconductor Manufacturing Company Limited (TSM) closed at $186.74 on November 13, 2024, representing a 2.60% decline from the previous trading session. The stock saw a daily trading range between $186.50 and $192.44. The Relative Strength Index (RSI14) at 40 suggests that the stock is approaching an oversold region, potentially indicating a reversal or stabilization in the near term. Currently, the stock is trading above its 50-day moving average of $184.19 but below its year-high of $212.60. The 200-day moving average at $159.81 exhibits longer-term uptrend support, reflecting sustained price strength over a more extended period. With the MACD demonstrating a positive trend (+3.30), momentum may favor buyers, albeit cautious ones due to recent declines.
Fundamental Analysis
TSMC stands out as a crucial player in the semiconductor industry, underpinning growth in AI applications and electronics manufacturing. The current PE ratio of 33.39 indicates a relatively high valuation compared to historical norms and can be a concern for value-oriented investors. The company posted an Earnings Per Share (EPS) of $5.59, supporting robust income figures. News indicates that geopolitical factors, such as U.S. orders affecting chip exports to China, pose challenges that could affect future financial performance. However, long-term prospects look promising, given positive analysis from brokerage firms forecasting potential market cap growth to approximately $2 trillion in 2025.
Next Trading Day and Week Prediction
The next trading day, November 14, 2024, may see some consolidation around current levels, possibly testing support at $177.97, given the RSI's near-oversold condition. Over the upcoming week, the market might explore around the $187.13 resistance mark. The expected trading range could be guided by an Average True Range (ATR) of 3.45, reflecting a potential swing higher from the current levels if sentiment turns bullish.
Intrinsic Value and Long-term Potential
With an impressive market cap of $845.23 billion and analysts' target median price set at $200, TSMC showcases intrinsic value above its discounted cash flow (DCF) valuation of $12.65. However, the backdrop of global policy influences, such as U.S.-China tensions and strategic U.S. facility developments, reflect a paradox of both opportunity and risk. Dividends add little to current returns but signal long-term operational success potential.
Overall Evaluation: Hold
From a technical standpoint, TSMC may experience a short-term bounce from recent lows, but risks due to geopolitical tensions and economic policy warrant caution. Fundamentally, its importance in the semiconductor sector and its expected growth keep the stock in favorable standing for long-term investors. Although the valuation seems stretched as per PE ratios, expectations for future expansion and broker sentiment sustain a 'Hold' status in anticipation of future performance stability and growth.
