Taiwan Semiconductor (NYSE:TSM) isn’t the first technology company that U.S.-based investors usually talk about, but I believe TSM is a stock pick that could be a huge winner in 2024. That’s because Taiwan Semiconductor’s CEO just prepared the market for rapid industry growth, stating that 2024 could be a “healthy growth year.” Therefore, I am bullish on TSM stock and consider it a high-conviction holding.
Taiwan Semiconductor’s name sums the company up concisely. The company is a gigantic semiconductor manufacturer that’s based in Taiwan but has clients on multiple continents.
Even people who’ve never considered international investing before should still take a look at Taiwan Semiconductor. The company has good ratings from analysts and just demonstrated its ability to sell plenty of tech components regardless of challenging economic conditions.
The Long, Slow Slide of TSM Stock
Taiwan Semiconductor stock, like many other technology stocks, started off 2023 with a bang but then went into a long, frustrating slide starting in the summer. The silver lining of this, however, is that Taiwan Semiconductor’s GAAP-measured trailing 12-month P/E ratio recently came down to a very reasonable 14.5x versus the sector median P/E ratio of 24.8x.
In other words, there’s good value here. Plus, Taiwan Semiconductor pays a forward annual dividend yield of 2%, which beats the sector average dividend yield of around 1%. You must admit — looking outside of U.S. borders can sometimes reveal excellent stock picks!
This isn’t to suggest that everything is perfect with Taiwan Semiconductor. Not long ago, following protests from local residents, Taiwan Semiconductor shelved its plans to build a chip plant at a site in Northern Taiwan. However, according to Nikkei Asia’s Hideaki Ryugen, Taiwan Semiconductor plans to build the manufacturing plant elsewhere in Taiwan.
In other words, Taiwan Semiconductor just hit a little speed bump in the road but is still in expansion mode. Furthermore, Taiwan Semiconductor has an outstanding track record of beating Wall Street’s quarterly EPS projections.
However, the market just put Taiwan Semiconductor to the test again as the company released its latest round of quarterly results. So, did Taiwan Semiconductor measure up or fall short?
Taiwan Semiconductor CEO Signals a Market “Bottom”
Suffice to say, Taiwan Semiconductor passed the market’s test with solid results for Fiscal Year 2023’s third quarter. First, the company reported revenue of $17.25 billion, down 14.46% year-over-year but up 10.18% quarter-over-quarter. This result outpaced the consensus estimate of $16.97 billion in revenue.
Turning to the company’s bottom line, Taiwan Semiconductor reported EPS of $1.26, thereby beating the Street’s call for EPS of $1.16. That’s impressive, considering the slump in demand for consumer electronics.
Perhaps best of all, Taiwan Semiconductor CEO C.C. Wei reassured investors that the demand slump would soon come to an end. “In these couple of months, we have started to see demand stabilise in the PC and smartphone end market,” Wei observed. Additionally, the CEO declared that product inventory controls have been “more healthy” than expected.
Moreover, Wei even went so far as to predict a near-term turnaround for the industry. “Right now, do we see the bottom? Very close,” he asserted.
Along with all of that, the Taiwan Semiconductor CEO brought a sense of confidence. As mentioned earlier, Wei stated, “We can expect 2024 to be a healthy growth year for TSMC [Taiwan Semiconductor],” and the company expects to “do better than the overall industry.”
Is TSM Stock a Buy, According to Analysts?
On TipRanks, TSM comes in as a Strong Buy based on eight Buys and one Hold rating assigned by analysts in the past three months. The average Taiwan Semiconductor stock price target is $120, implying 29.2% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell TSM stock, the most accurate analyst covering the stock (on a one-year timeframe) is Gokul Hariharan of JPMorgan Chase (NYSE:JPM), with an average return of 41.54% per rating and an 88% success rate. Click on the image below to learn more.
Conclusion: Should You Consider TSM Stock?
Today could be a great day for investors to start looking abroad for notable stock picks. Taiwan Semiconductor stock is a great example, as it has a good valuation, and the company pays a decent dividend.
Additionally, Taiwan Semiconductor surpassed Wall Street’s expectations despite ongoing challenges, and the company’s CEO is confident about the coming year’s performance. Therefore, I heartily believe that all investors should take a closer look at TSM stock.
