On Tuesday, Morgan Stanley maintained its positive stance on Taiwan Semiconductor Manufacturing Co. Ltd. (2330:TT) (NYSE: TSM), reiterating an Overweight rating with a price target of NT$860.00. The firm's analysis suggests that TSMC's strategy to diversify its manufacturing facilities overseas could alleviate geopolitical risk concerns for investors. This approach is expected to strengthen the company's position in artificial intelligence (AI) growth, particularly in the United States.
TSMC's stock experienced a notable increase of 4.6% today, outperforming the Taiex index, which rose by 1.8%. This surge in TSMC's share value reflects investor optimism following the company's announcement of its new phase plan, which emphasizes robust AI demand from U.S. customers. The plan also includes the provision of a 2nm process technology in the U.S., which is anticipated to help TSMC maintain its competitive edge against Intel (NASDAQ:INTC)'s 18A process.
The firm also highlighted the possibility of TSMC implementing a wafer price hike to pass through additional costs to its U.S. customers. Despite the potential increase in prices, the market's reaction was positive, as investors appear to view TSMC as a key player in leading-edge chip manufacturing for the U.S. market. This includes the production of Intel's advanced 2nm and 1.4nm central processing units (CPUs).
Investors have also taken note of the financial support TSMC has received, which amounts to a $6.6 billion subsidy. This figure stands in comparison to Intel's subsidy of $8.5 billion, underscoring the significant investment and confidence in TSMC's capabilities within the semiconductor industry.
InvestingPro Insights
As Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) continues to capture investor attention with its strategic moves and financial backing, real-time data from InvestingPro provides further insights into the company's financial health and market performance. TSMC's market capitalization remains robust at $632.97 billion, reflecting its significant presence in the semiconductor industry. The company's P/E ratio, a key indicator of market expectations about the company's earnings growth, stands at 24.21, with a slight adjustment to 25.32 when looking at the last twelve months as of Q4 2023. This suggests a market valuation that anticipates continued profitability.
Investors considering TSMC's long-term growth prospects may note the PEG ratio of -1.4, which could indicate that the company's stock is undervalued based on its earnings growth. Additionally, TSMC's revenue growth shows a slight decline of -4.51% over the last twelve months as of Q4 2023, which may be a point for investors to consider when evaluating the company's performance trajectory. However, with a strong gross profit margin of 54.36% and an operating income margin of 42.63%, TSMC demonstrates its ability to maintain profitability despite revenue fluctuations.
For those looking for investment guidance, InvestingPro offers additional insights with PRONEWS24 as a coupon code to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription. With 17 more InvestingPro Tips available, investors can delve deeper into TSMC's financials and market position to inform their investment decisions.
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