Should one Consider Purchasing TSMC Shares atPresent?
TSM, the renowned semiconductor giant, has been on a roll, with its stock soaring an impressive 87% over the past year, reaching a 2.06% increase as of now [1]. This stellar run continued after the company released its fourth-quarter 2024 results on January 16, causing its shares to jump almost 4% [2].
TSMC's Q4 2024 earnings were nothing short of impressive, with revenue reaching $26.9 billion, a whopping 37% increase from the previous year. The adjusted earnings also improved significantly, rising 55% to $2.24 per share [2]. The company not only beat expectations but also provided a solid revenue guidance of $25 billion to $25.8 billion for the first quarter of 2025, which was 6% higher than Wall Street's projections [2].
So, what's the takeaway for investors? Is it time to cash in or buy more? Let's delve deeper.
Long-term growth prospects suggest more upside
TSMC's robust performance extends beyond the current quarter. The company's Q4 2024 revenue of over $90 billion represented a nearly 30% increase from 2023 levels [2]. This stellar growth isn't a flash in the pan; TSMC anticipates its AI chip revenue to expand at a staggering 40% CAGR over the next five years. Meanwhile, the overall revenue growth is projected at a healthier 20% CAGR [3].
TSMC's growth is fueled by the immense demand for advanced chips in high-performance computing, AI, 5G smartphones, and PCs, all of which are growing sectors [3]. The global semiconductor market, valued at $729 billion in 2022, is projected to reach $1.47 trillion by 2030, according to market research firm SNS Insider [1]. With a remarkable 64% share of the global foundry market, TSMC seems well-positioned to capitalize on this growth [1].
The company's clientele includes heavyweights like Nvidia, AMD, Qualcomm, and Broadcom, as well as tech giants such as Sony and Apple [2]. Despite U.S. government's proposed export restrictions, TSMC's management remains optimistic about managing the impact, further fueling investor confidence [2].
Investing in TSM now: A smart move or not?
TSMC's stock may be trading at a higher premium now, with a trailing earnings multiple of 33, compared to its five-year average of 22 [2]. However, with a forward price-to-earnings ratio of 24, investors are still getting a relatively good deal [2]. Compared to the tech-laden Nasdaq-100 index's forward earnings multiple of 25, TSMC appears to present a worthy investment opportunity [2].
The continued growth projections, coupled with the company's strategic position in the global semiconductor market, suggest that purchasing TSM stock is still a viable option for those seeking long-term returns [3]. The present market environment, however, demands prudence and a deep understanding of the company's fundamentals and growth potential before committing to any investment decision.
- Wall Street Journal
- CNBC
- The Motley Fool
- Bloomberg
- Investor's Business Daily
Given TSMC's impressive earnings and growth prospects, some investors might consider reinvesting their profits or allocating new funds into the company. The anticipation of strong demand for advanced chips in various sectors and TSMC's strategic market position further strengthen the case for investing in TSM. However, it's essential to conduct thorough research and analysis before making any investment decision, considering the company's current valuation and overall market conditions.
