January 23, 2025
Chicago, IL – January 24, 2025 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include, Taiwan Semiconductor Manufacturing Company Ltd. TSM, Broadcom Inc. AVGO, Marvell Technology, Inc. MRVL and Apple Inc. AAPL.
Taiwan Semiconductor Manufacturing Company Ltd. , better known as TSMC, saw its shares scale northward after posting record fourth-quarter net income, which topped analysts’ projections. The foundry behemoths’ fourth-quarter net profit soared 57% to $374.68 billion from a year earlier, driven by a surge in demand for artificial intelligence (AI) chipsets.
But it’s not the latest quarterly result that propelled its shares higher. The TSMC stock has already gained 91% in the past year with the advent of AI. However, can the TSMC stock sustain this growth and remain a good buy? Let’s see –
While the current quarterly results have boosted the TSMC stock, the long-term growth trajectory depends on the long-term growth prospects. TSMC’s first-quarter revenue guidance of $25 billion to $25.8 billion is 6% higher than expectations, suggesting strong near-term growth. Also, management expects a 20% revenue CAGR over the next five-year period, driven by growth opportunities in AI, 5G smartphones, and high-performance computing.
The rising demand for TSMC’s custom AI chips from Broadcom Inc . and Marvell Technology, Inc . has strengthened its future growth. Meanwhile, Apple Inc. has witnessed a rise in demand for its smartphones that require TSMC’s chips, a positive development for the latter. TSMC’s bright future is also due to the forthcoming launch of their highly efficient 2-nanometer (nm) chips this year, with pre-order demand exceeding 3 and 5nm.
TSMC’s dominant position in the global foundry market means the stock is well-poised to take advantage of the growing opportunities. After all, the semiconductor market worldwide is projected to generate $1.47 trillion in revenues in 2030 from $729 billion in 2022, per SNS Insider. Management mentioned that the U.S. government’s curb on chip sales to China is “manageable.”
Second, the new Stargate AI infrastructure program is expected to be a game changer for the TSMC stock. President Trump intends to allocate $500 billion for AI infrastructure, boosting AI stocks. TSMC stands to benefit as its advanced chips are essential for operating AI data centers.
Third, the TSMC stock is likely to rise because the company generates profits efficiently, with a net profit margin of 40.52%, slightly more than the Semiconductor - Circuit Foundry industry’s 40.51%, indicating a high margin.
With the TSMC stock poised to gain in the long term due to multiple growth opportunities, a new Stargate AI infrastructure project, and strong fundamentals, it is judicious for investors to place their bets on the stock now. Brokers also expect the TSMC stock to rise and have raised its average short-term price target by 7.5% to $235.13 from the previous $218.70. The highest short-term price target is $265, indicating an upside of 21.2%.
Additionally, TSMC’s earnings per share are estimated to increase by 21% from last year. The Zacks Consensus Estimate is $9.12. TSMC, therefore, rightfully has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>
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