Shares of chip company Taiwan Semiconductor Manufacturing (TSM) sank in today’s trading ahead of its Q2 earnings results on July 18 after the market closes. Analysts are expecting earnings per share to come in at $1.41 on revenue of $19.155 billion. This equates to 24.8% and 36% year-over-year increases, respectively, according to TipRanks’ data.
Ideally, earnings per share should grow faster than revenue as this demonstrates a high degree of operating and financial leverage in the business. Nevertheless, it’s worth noting that TSM has beaten earnings estimates every quarter since its 2021 Q3. Therefore, it’s possible that EPS growth will outpace revenue growth.
What Do Options Traders Anticipate?
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a large 6.91% move in either direction.
Is TSM a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on TSM stock based on 11 Buys assigned in the past three months. After a 70% rally in its share price over the past year, the average TSM price target of $184.30 per share implies 6.49% upside potential.
Interestingly, hedge funds seem to agree. When it comes to “smart money,” money managers are confident in TSM stock. Indeed, hedge funds increased their holdings in the stock by 5.8 million shares in the past quarter. As a result, they have a very positive confidence signal, as indicated by the graphic below.
