TSM Stock: Taiwan Semiconductor Returns To Growth With Q1 Beat

Taiwan Semiconductor Manufacturing (TSM), the world’s largest contract chipmaker, on Thursday beat expectations for the first quarter. But TSM stock fell in early trading.

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The chip foundry, better known as TSMC, earned $1.38 per U.S. share on sales of $18.87 billion in the March quarter. Analysts polled by FactSet had expected earnings of $1.30 a share on sales of $18.31 billion. In the year-earlier period, TSMC earned $1.30 per U.S. share on sales of $16.62 billion.

With its Q1 report, TSMC returned to sales and earnings growth after four consecutive quarters of declines on a year-over-year basis. Taiwan Semiconductor’s sales rose 12.9% while earnings climbed 6.2%.

For the current quarter, TSMC expects revenue of $19.6 billion to $20.4 billion. The midpoint of $20 billion topped Wall Street’s target of $19.44 billion. In the second quarter last year, TSMC generated revenue of $15.47 billion.

TSM Stock Drops After Report

In premarket trading on the stock market today, TSM stock slid 2% to 136.21.

TSMC’s customers include Apple (AAPL), AMD (AMD), Nvidia (NVDA), Qualcomm (QCOM) and more.

“Our business in the first quarter was impacted by smartphone seasonality, partially offset by continued HPC (high-performance computing)-related demand,” Chief Financial Officer Wendell Huang said in a news release.

He added, “Moving into second quarter 2024, we expect our business to be supported by strong demand for our industry-leading 3-nanometer and 5-nanometer technologies, partially offset by continued smartphone seasonality.”

Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.

TSM Stock Is Recent Breakout

In the first quarter, shipments of 3-nanometer chips accounted for 9% of total wafer revenue, 5-nanometer accounted for 37%, and 7-nanometer accounted for 19%. Advanced technologies, defined as 7-nanometer and smaller nodes, accounted for 65% of total wafer revenue.

TSMC lowered its industry growth expectations slightly but kept its company target, Barclays analyst Simon Coles said in a client note. The company reiterated its guidance for revenue growth in the low to mid 20% range, he said.

“AI remains the bright spot” for Taiwan Semiconductor as the company sees a gradual recovery in most of its end markets this year, Coles said. He rates TSM stock as overweight with a price target of 145.

On Jan. 18, TSM stock broke out of a cup-with-handle base at a buy point of 105.52, according to IBD MarketSurge charts. The breakout occurred after TSMC delivered a beat-and-raise report for the fourth quarter.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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