TSMC defies market pessimists as stock bulls raise target price after Temasek, Buffett’s Berkshire dump stakes
- TSMC has risen since Temasek cut its losses in the third quarter last year, and climbed further after Buffett’s Berkshire slashed the bulk of its US$4.1 billion bet
- Analysts at Goldman and Daiwa like the stock as excess inventory depletes over time and the chip maker diversifies its manufacturing facilities
Taiwan Semiconductor Manufacturing Co is confounding market pessimists, as the stock added more than US$38 billion in market value this year. Temasek Holdings of Singapore and Warren Buffett’s Berkshire Hathaway may be rueing the decision to cut their stakes last year.
Some of Wall Street’s investment banks have maintained their bullish views on the world’s biggest semiconductor contract manufacturer and the biggest member of the Taiex Index. Thirty-nine of the 41 analysts who track the stock recommended a buy, according to Bloomberg data.
They have also raised the consensus 12-month price target by 3.3 per cent this year to NT$638.78, implying a 29 per cent upside from Thursday’s closing price of NT$493.50. TSMC jumped 1.3 per cent to NT$500 at 10.45am local time in Taipei on Friday.
The stock has risen more than 17 per cent since September 30 after Temasek cut its losses, and by about 11 per cent since December 31 when Berkshire slashed the bulk of its stake soon after its US$4.1 billion bet on the chipmaker, according to US regulatory filings.
31:03
ChatGPT: the Hong Kong stock market, China’s military and re-creating the dead
“We like the stock as we believe the company’s solid technology leadership and execution make it better-positioned than peers to capture the industry’s long-term structural growth,” Goldman Sachs analyst Bruce Lu said in a report. TSMC could benefit particularly in areas such as 5G, artificial intelligence and electric vehicles, he added.
The upside may take time to come to fruition, though, following a weak earnings report and guidance earlier this month. Net profit rose 2 per cent in the March quarter, the slowest in three years. Revenue is likely to decline this year, versus an earlier forecast for a slight growth, it warned.
Sales will continue to shrink in the second quarter due to high inventory, and will only “rebalance to a more healthy level” in the third quarter, chief financial officer Wendell Huang said in a call on April 20. The industry slowdown could last for another quarter or two, analysts said.
