Taiwan Semiconductor Manufacturing, better known as TSMC, on Thursday beat analyst estimates for earnings in the fourth quarter and guided higher than views for the year ahead. TSM stock jumped on the news.
The world's largest contract chip manufacturer earned $1.44 per U.S. share on sales of $19.62 billion in the December quarter. Analysts polled by FactSet had expected earnings of $1.38 a share on sales of $19.68 billion. In the year-earlier period, TSMC earned $1.87 per U.S. share on sales of $20.54 billion.
TSMC has reported four straight quarters of declining revenue on a year-over-year basis, but expects to return to growth in the current quarter. The company is facing weak demand for chips for smartphones and automobiles.
For the first quarter, TSMC expects revenue of $18 billion to $18.8 billion. The midpoint of $18.4 billion topped Wall Street's target of $18.27 billion. In the first quarter last year, TSMC generated revenue of $16.62 billion.
"Our fourth-quarter business was supported by the continued strong ramp of our industry-leading 3-nanometer technology," Chief Financial Officer Wendell Huang said in a news release. "Moving into first-quarter 2024, we expect our business to be impacted by smartphone seasonality, partially offset by continued HPC (high-performance computing)-related demand."
TSMC Outlook Implies 'Prolonged Downturn'
TSMC's customers include Apple, AMD, Nvidia, Qualcomm and more.
The chipmaker forecast 2024 revenue to grow more than 20% thanks to booming demand for high-end chips used in artificial intelligence applications, Reuters reported.
"Management's growth forecast for 2024 is in the low- to mid-20s percent, slightly better than the Street's expectation of low-20s percent, and somewhat below our estimate of high-20s percent," Needham analyst Charles Shi said in a client note.
He added, "As our estimate assumed a normal cycle recovery, we think TSMC's guidance implies a prolonged downturn and a slower-than-normal cycle recovery in 2024."
Still, Shi reiterated his buy rating on TSM stock with a price target of 115.
TSM Stock Is A Recent Breakout
On the stock market today, TSM stock surged 9.8% to close at 113.03.
On Dec. 11, TSM stock broke out of a cup-with-handle base at a buy point of 100.70, according to IBD MarketSmith weekly charts.
In other news, TSMC expects to delay production at the second of two semiconductor plants it is building in Arizona, the Wall Street Journal reported. The company now expects volume production at the factory to begin in 2027 or 2028, vs. previous expectations of 2026.
TSMC expects capital expenditures of $28 billion to $32 billion in 2024, vs. the $30.45 billion it spent in 2023.
Taiwan Semiconductor ranks fourth out of 32 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. TSM stock has an IBD Composite Rating of 78 out of 99.
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