Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker, on Thursday beat expectations for earnings in the fourth quarter but missed on sales. It also guided below views for the current quarter as chip demand weakens. Still, TSM stock rose after the report.
Taiwan Semi, better known as TSMC, earned $1.82 per U.S. share on sales of $19.93 billion in the December quarter. Analysts polled by FactSet had predicted TSMC earnings of $1.80 a share on sales of $20.6 billion. On a year-over-year basis, TSMC earnings rose 57% while sales climbed 30%.
For the current quarter, TSMC forecast sales of $16.7 billion to $17.5 billion. The midpoint of $17.1 billion was below Wall Street's target of $17.65 billion. In the year-ago period, it generated sales of $16.49 billion. Its guidance implies first-quarter sales growth of just 1% year over year.
On the stock market today, TSM stock jumped 6.4% to close at 87.
Taiwan Semiconductor produces chips for fabless semiconductor firms such as AMD, Apple, Nvidia, Qualcomm and others.
Chip Demand Weakening
"Our fourth-quarter business was dampened by end-market demand softness, and customers' inventory adjustment, despite the continued ramp-up for our industry-leading 5-nanometer technologies," Chief Financial Officer Wendell Huang said in a news release.
He added, "Moving into first-quarter 2023, as overall macroeconomic conditions remain weak, we expect our business to be further impacted by continued end-market demand softness, and customers' further inventory adjustment."
Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
In the fourth quarter, shipments of 5-nanometer chips accounted for 32% of TSMC's total wafer revenue while 7-nanometer chips accounted for 22%. TSMC defines 7-nanometer and smaller nodes as advanced technologies.
TSMC noted that it has seen demand soften for data center chips. Meanwhile, demand for chips for smartphones and consumer electronics remains weak.
TSM Stock Analysts Chime In
The company expects low single-digit percentage growth in 2023 and implied that the second quarter could mark the revenue bottom for the year.
"TSMC's 2023 guidance is within the range and may be slightly better than the average buy-side investor's expectations," Needham analyst Charles Shi said in a note to clients.
Shi reiterated his buy rating on TSM stock after the report. He has a price target of 110 on TSM stock.
Susquehanna Financial Group analyst Mehdi Hosseini called the fourth-quarter report "a mixed bag at best." He maintained his neutral rating on TSM stock.
"We don't believe TSMC offered enough guide and/or commentary to help completely de-risk the consensus estimates," Hosseini said in a note.
TSM stock ranks 10th out of 32 stocks in IBD's semiconductor manufacturing industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 84 out of 99.
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