TSMC shares were rocky last week. This is where Wall Street says the stock is headed
Shares of Taiwan Semiconductor Manufacturing Company (TSMC) were rocked by geopolitical developments from the U.S. last week, even as the firm reported earnings that beat expectations. TSMC and other semiconductor shares fell last Wednesday after reports of potentially tighter restrictions surfaced. Bloomberg on Wednesday reported that the Biden administration is considering a wide-sweeping rule to clamp down on companies exporting their critical chipmaking equipment to China. China accounted for 16% of TSMC’s net revenue in the second quarter of 2024 — up from 9% in the first quarter, according to TSMC’s second-quarter earnings report. Revenue from North America took up 65%, according to the report. And in an interview published Tuesday, former President Donald Trump said Taiwan should pay the U.S. for defense, also claiming that Taiwan took “about 100%” of America’s semiconductor business. On Thursday, TSMC reported second-quarter earnings that beat revenue and profit expectations . The firm’s shares overall lost about 6.7% last week as of July 19’s close. Where is the stock headed? CNBC Pro takes a look at what Wall Street is saying. Price target hikes for TSMC Over July 18 and 19, after those developments, 22 of 42 analysts who cover TSMC’s Taiwan-listed shares hiked their price targets for the stock, according to FactSet. None reduced or left the price target unchanged. Analysts gave the stock potential upside of 30.5% based on the consensus price target. TSMC’s shares are also listed in the U.S. Needham, which hiked its price target for the U.S.-listed shares of TSMC from $168 to $210 in a July 15 note, said it expects the firm’s foundry business to strengthen as it does “not foresee a competitive challenge for the next several years.” “Capital efficiency has been a top focus for TSMC, and all signs indicate that the capital discipline will continue into 2025,” said Needham analysts, who predicted TSMC’s free cash flow from 2023 to 2025 is set to quadruple. That could mean more upside to dividend increases, they said. Morningstar said in a note that Trump’s negative Taiwan comments and the report on possible new export restrictions should have limited direct impact on TSMC — as most of its direct customers are from the U.S. or Taiwan. “We see this week’s pullback as an entry point for investors seeking an inexpensive way to gain exposure to artificial intelligence and overall semiconductor growth,” it said in the July 19 note. “Management said the shortage of advanced packaging capacity for AI chips should persist throughout 2025. We believe the risk of oversupply is still modest, as non-AI-related expansion plans are largely unchanged,” Morningstar added. Morgan Stanley, however, sounded a negative note. It removed TSMC — among other stocks — from its focus lists. It remained overweight on TSMC, however. — CNBC’s Michael Bloom and Arjun Kharpal contributed to this report.
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