Sign InTSMC Technical Analysis: Stock Nears 52-Week High Amid Strong Investor Interest
Summary
As of July 12, 2024, TSMC (TSM) closed at $187.35, reflecting strong technical indicators and robust fundamentals, although its significant overvaluation compared to intrinsic value suggests caution for new investors while current holders may consider maintaining their positions amid bullish momentum and upcoming earnings speculation.
Technical Analysis
TSMC (TSM) closed at $187.35 on July 12, 2024, with a positive daily change of 1.54%. The stock traded between $182.77 and $190.37, coming close to its 52-week high of $193.47. The volume was 17.99 million, significantly above the average volume of 14.91 million, indicating heightened investor interest.
The Relative Strength Index (RSI14) stands at 64, suggesting the stock is nearing overbought territory but is not there yet. The 50-day moving average of $162.00 and the 200-day moving average of $125.16 indicate a robust upward trend. The Moving Average Convergence Divergence (MACD) over a 3-month period is positive at 5.99, supporting the bullish sentiment.
Support exists at $179.69, and resistance is seen at $191.05, with an Average True Range (ATR) of 3.29, implying moderate volatility. Based on the stop-loss value of $178.63, there is a calculated risk level below current support, suggesting prudent risk management.
Fundamental Analysis
TSMC has a market cap of $873.89 billion and a P/E ratio of 36.24, indicating a high valuation compared to industry norms but justifiable given its market leadership. The company's EPS is 5.17, reflecting solid earnings performance. However, the DCF valuation shows a value of $63.83, significantly lower than the current price, which raises concerns about overvaluation in intrinsic terms.
The dividend yield stands at 0.26%, with the next dividend date on October 9, 2024, demonstrating a modest return for income-focused investors.
There's a recent news buzz about TSMC being at a 52-week high and investor speculation on its further potential gains. The stock is also highlighted as a top momentum pick, suggesting robust sentiment from momentum investors.
Short-Term Prediction
For the next trading day on July 15, 2024, expect TSMC to trade within the support and resistance levels of $179.69 and $191.05. Volume and recent bullish momentum could push the stock towards the upper resistance range, but caution is warranted due to possible profit-taking at highs.
Over the upcoming week, leading up to the earnings announcement on July 18, 2024, volatility may increase. Investor anticipation and speculative trading could drive the stock closer to or potentially past its 52-week high of $193.47 if earnings forecasts appear promising.
Intrinsic Value and Long-Term Potential
Based on the DCF valuation of $63.83, TSMC appears significantly overvalued compared to its intrinsic worth. However, its market leadership, ongoing technological advancements, and robust earnings performance justify a premium valuation. The long-term potential remains strong provided the company continues to innovate and maintain its market dominance.
Overall Evaluation
TSMC is categorized as a 'Hold' candidate at its current valuation. The bullish technical indicators and strong fundamental performance justify maintaining a position for investors already invested. However, potential new investors should be cautious due to the high P/E ratio and significant price deviation from the intrinsic value. A buying opportunity might present itself if the stock pulls back to align more closely with its DCF value.
In conclusion, while TSMC shows promise as a long-term asset, the current overvaluation warrants monitoring for a better entry point. Investors should stay vigilant, especially with the upcoming earnings announcement which could significantly impact the stock's performance.
