While chip stocks, in general, got a boost from Bank of America’s recent study, Taiwan Semiconductor (NYSE:TSM) didn’t miss out on the gains either. The latest word from Susquehanna, in fact, is looking for better-than-expected margins to come out of the stock when it releases its latest earnings report.
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The report, via analyst Mehdi Hosseini, notes that the average selling price for wafers is on the rise. With that in mind, gross margins should also rise. It also doesn’t hurt, Hosseini noted, that foreign exchange rates are improving, as are depreciation and amortization costs. Just to top it off, utilization rates are also improving, and when you add all these results together, the end result should be a net positive for Taiwan Semiconductor.
However, there are some potential headwinds brewing for Taiwan Semiconductor. The Phoenix, Arizona, plant is running into construction issues. While Taiwan Semiconductor is blaming a labor shortage, workers at the plant note that there have been significant safety issues cropping up, as well as an overall disorganization that’s hampering progress. Reports of multiple contractors and a distinct lack of coordination aren’t helping. And on top of all that, Taiwan Semiconductor faces troubles at home over water rights, which is necessary to construct chips.
Is Taiwan Semiconductor a Buy, Sell, or Hold?
Taiwan Semiconductor enjoys substantial support from analysts. With six Buy ratings and two Holds, Taiwan Semiconductor stock currently holds a Strong Buy rating. Further, TSM’s average price target of $122.50 implies 35.85% upside potential.
