Taiwan Semiconductor Manufacturing (TSM), the world’s largest contract chip maker, on Thursday beat analyst estimates for the second quarter, giving a better-than-expected forecast for the current period. The TSM stock rose on the news.
The chip foundry earned $ 1.55 per U.S. share on sales of $ 18.16 billion in the June quarter. Analysts polled by FactSet expected earnings of $ 1.44 per share on sales of $ 17.68 billion. On an annual basis, Taiwan Semiconductor’s earnings increased 67%, while sales increased 36%.
The company, also known as TSMC, announced better-than-expected revenue in the second quarter last Friday.
For the third quarter, Taiwan Semi forecast revenue of $ 19.8 billion to $ 20.6 billion. The $ 20.2 billion centerpiece is well above Wall Street’s $ 18.66 billion consensus estimate.
The TSM share rises after the report
In the stock market today, the TSM stock rose 2.9% to close at 83.67.
Taiwan Semiconductor makes groundbreaking chips for top-notch semiconductor companies such as Apple (AAPL), AMD (AMD), Nvidia (NVDA) and Qualcomm (QCOM).
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“Our business in the second quarter was supported by HPC (high-performance computing), IoT (Internet of Things) and automotive-related demand,” CFO Wendell Huang said in a press release.
He added: “As we move into the third quarter of 2022, we expect our business to be supported by continued demand for our industry-leading 5-nanometer and 7-nanometer technologies.”
Circuit widths of chips are measured in nanometers, which is one billionth of a meter.
In the second quarter, shipments of 5-nanometer chips accounted for 21% of TSMC’s total wafer revenue, and 7-nanometer chips accounted for 30%. Advanced technologies, defined as 7-nanometers and smaller designs, accounted for 51% of its total wafer revenue.
Stock correction period ahead
Despite the beat-and-raise report, TSMC made some cautious comments for the end of 2022 and the beginning of 2023.
TSMC predicted an inventory correction period for PC, smartphone and consumer electronics customers, running from the end of 2022 through the first half of 2023. These markets are experiencing declining product sales.
“On the call, management offered what we consider optimistic realism around the company,” Needham analyst Charles Shi said in a note to customers. “While expecting four plus quarters of inventory correction for the industry, management believes 2023 will still be a growth year for TSMC.”
Shi reiterated its buy rating on the TSM stock.
Meanwhile, Cowen analyst Krish Sankar lowered his price target on TSM shares to 100 from 115 and kept his market performance.
In a report, Sankar said comments on the upcoming inventory adjustments among mobile and PC customers overshadowed TSMC’s positive earnings report.
Taiwan Semiconductor has So-So Composite Rating
According to the IBD Stock Checkup, the TSM stock ranks No. 12 out of 31 stocks in IBD’s semiconductor manufacturing group. TSM stock has an IBD Composite Rating of 63 out of 99.
IBD’s Composite Rating combines five separate proprietary ratings into one easy – to – use rating. The best growth stocks have a Composite Rating of 90 or better.
IBD’s semiconductor manufacturing group ranks No. 153 out of 197 industry groups tracked by IBD. Semiconductor stocks have fallen due to concerns that the chip cycle will soon turn negative.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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