TSMC Faces Short-Term Challenges Amid Long-Term Growth Potential; Analysts Recommend Hold

Technical Analysis

TSMC's recent closing price of $165.25 reflects a decline of 1.78% from the previous day, positioned between its intraday low of $164.07 and high of $168.63 on March 28, 2025. The Relative Strength Index (RSI) at 44 suggests that the stock is nearing oversold territory, potentially indicating upcoming buying interest. The stock fails to align with vital moving averages, currently trading below both its 50-day ($192.55) and 200-day ($185.17) moving averages, showcasing a bearish short-to-medium-term outlook. The MACD at -7.77 further emphasizes short-term negative momentum. With resistance pegged at $172.97 and no immediate support identified, volatility is underscored by an Average True Range (ATR) of 3.70, pointing towards potential price swings in the upcoming sessions.

Fundamental Analysis

TSMC's formidable position is underscored with a market capitalization of $856.97 billion, signaling its significance in the semiconductor industry. The P/E ratio of 24.23, based on a trailing EPS of $6.82, suggests a relative fair valuation when compared to sector peers. Despite recent setbacks, as evidenced by the negative market response to geopolitical tariff concerns and strategic overseas investments, analyst consensus trends towards a "Buy," bolstered by 9 buy ratings among analysts. The discounted cash flow (DCF) value at $22.24 raises questions about potential overvaluation, or possible future earnings growth not yet priced in. The dividend yield based on TTM stands at 1.19%, providing a modest income stream for investors, with a dividend date set for April 10, 2025.

Near-Term Outlook

For the next trading day and the upcoming week, TSMC may experience price fluctuations in response to potential new developments in tariffs and strategic expansions. The recent announcement of an increased domestic presence in Taiwan could become a stabilizing factor amidst overseas ventures, possibly offering a positive sentiment shift.

Long-Term Potential

Strategically, TSMC's reaffirmation of its commitment to Taiwan manifests strength in bolstering local manufacturing capabilities. This, coupled with its substantial investments in U.S. fabs, positions the company to adapt to geopolitical fluctuations and capitalize on shifts in supply chain dynamics. However, the disparity suggested by the DCF model invites scrutiny concerning its intrinsic value, highlighting the need for continuous monitoring of its global operations' profitability and efficiency.

Overall Evaluation: Hold

Given the technical indicators pointing to an oversold condition and the robust fundamental foundation, TSMC is currently poised as a "Hold" candidate. While it faces temporary headwinds due to geopolitical concerns and its high capital expenditures, its long-term growth prospects remain attractive contingent on successful strategic execution and industry demand recovery.