Shares of the world’s largest chipmaker, Taiwan Semiconductor Manufacturing Company (NYSE:TSM), or simply TSMC, continue to be volatile. Apart from the kneecaps from the recent issues in China, there are many other factors that are keeping the company’s prospects under pressure.
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Not only has TSMC been at the crux of the semiconductor power game between the U.S. and China this year, but it has also been a sufferer from the broader semiconductor market issues. So far in 2022, TSM stock has declined 38%.
However, it is the most recent developments that are concerning investors right now. First, another major COVID resurgence in China, followed by protests against lockdowns by civilians, tugged at the nerves of investors, with the main concern being sustained supply chain disruptions.
A significant decline in demand from one of TSMC’s major markets, China, is expected to be an overhang for the company’s near-term prospects.
Secondly, industry research firm Gartner released its 2023 forecast for the semiconductor market on Monday, and it was not what investors wanted to hear. Gartner anticipates a decline of 3.6% in semiconductor sales in 2023.
The declining trend (26.3% growth in 2021, an estimated 4% growth in 2022, and a 3.6% retraction in 2023) underscores the woes of the semiconductor industry. But what stood out about the report was the drastic downward revision from the firm’s prior expectation of 7.4% growth this year followed by a 2.5% decline in 2023.
Is TSM Stock a Buy or Sell?
Despite the strong currents that are roiling TSMC now, Wall Street thinks that the long-term holds promise. TSM stock has a Strong Buy consensus rating based on five unanimous Buys. The 12-month price target of $99.50 indicates an upside of almost 26%.
Moreover, TSM shares are trading at a discount compared to the technology sector median. The P/E is a little more than 12 times the forward 12-month earnings estimate, which is below the sector median of around 19X. This presents a good time to scoop up TSM shares.
Key Takeaway
Although TSMC is facing severe near-term risks, its position of importance in the global semiconductor scene makes the company too big to fail. Hence, a longer-term outlook is what can keep investors away from the noise.
