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Taiwan Semiconductor (TSM) shares are slipping ahead of the company’s much-anticipated fiscal Q2 earnings scheduled for Thursday, July 16.
Consensus is for the world’s largest semiconductor contract manufacturing company to post about $39.6 billion in revenue on $3.80 in earnings per share, up roughly 54% on a year-over-year basis.
Year-to-date, TSM stock is up about 40% at the time of writing, but options pricing suggests further upside on the back of the Q2 print is unlikely in the near term.
Where Options Data Suggests TSMC Stock Is Headed
Despite booming artificial intelligence (AI) demand, options data signals the path to least resistance is down, at least in the near term.
According to Barchart, the put-to-call ratio on TSM contracts expiring July 17 sits at 1.25x currently, indicating the derivatives market is bearish on what lies right after earnings for the Taiwanese titan.
Note that the lower price on those contracts is set at $410, signaling potential for a more than 4% downside through the end of this week.
That said, Barchart itself holds an “88% BUY” opinion on Taiwan Semiconductor, reinforcing that the technical momentum remains in favor of TSM shares.
Why Caution Is Warranted in Playing TSM Shares
Investors are advised to exercise caution in playing TSM stock ahead of the firm’s Q2 print also because it’s trading at a forward price-to-earnings (P/E) ratio of more than 29x.
Such a valuation multiple makes it even more expensive to own at current levels than Nvidia (NVDA); and with the U.S.-Iran conflict escalating again, the high-flying tech names could face liquidations as the risk-off sentiment takes hold again.
For the semiconductor sector, the said geopolitical tensions and the subsequent closure of the Strait of Hormuz aren’t just about the risk of an oil shock; they threaten the supply of critical minerals and industrial gases as well, including helium, which is indispensable for ultra-precise temperature regulation during wafer processing, and photolithography at large.
In short, the Iran war, if it drags on, could result in prolonged pressure on chip stocks like TSM.
Wall Street Remains Bullish on Taiwan Semiconductor
On the flip side, investors should note that Wall Street remains bullish on TSM shares for the next 12 months.
The consensus rating on Taiwan Semiconductor sits at “Strong Buy” currently, with the mean price target of about $463 indicating potential upside of another 8% from here.
