TSMC’s 1Q Results Beat Estimates; Street Says Hold

Taiwan Semiconductor Mfg. Co. (TSMC) today announced results for the fiscal first quarter with revenues up 25.4% year-on-year to $12.9 billion. Analysts were expecting revenues of $12.8 billion. The semiconductor company reported diluted EPS of $0.96 per ADR unit beating consensus estimates of $0.92.

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TSMC’s (TSM) VP and CFO, Wendell Huang said, “Our first quarter business was supported by HPC-related demand, balanced by a milder smartphone seasonality than in recent years. Moving into second quarter 2021, we expect our revenue to be flattish, as HPC-related demand will continue to grow, offset by smartphone seasonality.”

The company reported a gross margin of 52.4% in 1Q and a net profit margin of 38.6%. TSMC stated that wafers of 5-nanometer (nm) made up 14% of the company’s total wafer revenue while 7nm chips comprised 35%. Advanced technologies chips accounted for 49% of TSM’s total wafer revenues.

TSM also provided its outlook for fiscal 2Q FY21 and expects revenues to range between $12.9 billion to $13.2 billion. Based on the exchange rate of $1 to NT$28.4, TSM anticipates gross profit margin to be between 49.5% and 51.5% and operating profit margin to land between 38.5% and 40.5%. TSM also expects to incur capex of around $30 billion in FY21. (See Taiwan Semiconductor Mfg. Co stock analysis on TipRanks)

Following the earnings announcement, Susquehanna analyst Mehdi Hosseini upgraded the price target from $83 to $85 (29% downside potential) and reiterated a Sell on the stock.

Hosseini said in a research note, “We are updating our estimates for TSM following the company’s 1Q21 earnings. Although the 3-Yr capex guide of $100B is expected to help drive 10-15% revenue CAGR [compounded annual growth rate] 2020-2025, we expect growth acceleration in depreciation and higher operating expenses to drive lower EPS CAGR.”

Shares of TSM have popped 130.6% in the past year.

Overall, the Street is sidelined on the stock with a Hold consensus rating based on 1 Buy, 2 Holds, and 1 Sell. The average analyst price target of $83 implies a 29% downside at current levels.