Taiwan Semiconductor Manufacturing is the IBD Stock Of The Day, as the world's leading contract chipmaker benefits from customers ordering chips for artificial intelligence. TSM stock rose Wednesday.
The company, better known as TSMC, on Monday signaled better-than-expected second-quarter results when it announced monthly sales for June.
TSMC generated second-quarter revenue 1% above analyst estimates, Wedbush Securities analyst Matt Bryson said in a note to clients. Its June-quarter sales were the equivalent of $15.65 billion, vs. $17.89 billion in the same period last year. TSMC reports monthly sales in Taiwan dollars.
AI chips have been a bright spot for TSMC. They come amid slack sales of processors for personal computers, traditional servers and smartphones. TSMC makes AI chips for fabless semiconductor firms including AMD, Broadcom and Nvidia.
TSM Stock Could Be Forming Flat Base
On the stock market today, TSM stock rose 2.6% to close at 103.90.
TSM stock is bouncing off a pullback to its 21-day exponential moving average and 10-week line, according to IBD analysis.
Taiwan Semiconductor also is on track to form a flat base with a buy point of 110.69 in the next week or so.
On May 25, TSM stock broke out of a 14-week consolidation pattern, according to IBD MarketSmith charts.
TSMC Earnings Due Next Week
While TSMC's second-quarter sales report was positive, a more significant recovery for semiconductor sales appears to have pushed out of this year and into 2024, Bryson said.
"While we believe our 2023 numbers are still achievable, TSMC's sales linearity looks to be more back-end loaded than we had previously anticipated," he said. Bryson rates TSM stock as outperform.
Bryson said he remains positive on TSM stock given the company's role in producing nearly all available AI chips. Plus, Taiwan Semiconductor benefits from making chips for Apple's iPhone. He called it "one of the few consumer products holding up in 2023."
TSMC plans to report its second-quarter results on July 20.
TSM Stock Called Favored 'Long Idea'
Wall Street remains more curious about TSMC's outlook than its results, Mizuho Securities analyst Jordan Klein said in a note to clients. Many analysts expect TSMC to guide lower than estimates for the third quarter, he said.
Still, Klein said he's bullish on TSM stock heading into next year. He sees an expected reacceleration of revenue growth, aided by robust AI chip demand. The company also should benefit from a recovery in smartphone sales. There also will be higher prices from a mix shift to 3-nanometer chips, he said.
"I rank TSM as one of my favored semi long ideas that remains under-owned (and) very cheap relative to expected growth rebound next year," Klein said.
Further, TSM stock is on the IBD Tech Leaders list.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
