Taiwan Semi (TSM) is a new catalyst driven idea at Morgan Stanley, with the investment bank reiterating its Overweight call on the stock in a note to clients Monday.
The firm, which maintained an NT$860 price target on the stock, said the catalyst is the company's first-quarter results call on April 18.
The investment bank said, "We think the company's comments around AI semi growth, cycle recovery, and gross margin trends will result in share price volatility."
Analysts explained there are three potential scenarios for the event: "Scenario 1: 2Q24 gross margin to decline below 52%, with no recovery soon. Full-year 2024 revenue to grow only low 20s (%) Y/Y. Scenario 2: 2Q24 gross margin at around 52%; full-year revenue to grow close to 25% Y/Y. Scenario 3: 2Q24 gross margin to be sustained above 53%. 2Q24 revenue to rise 7-10% Q/Q, with full-year revenue growth to exceed 25% Y/Y."
If scenario one occurs, Morgan Stanley predicts the stock will fall 4%, scenario two will see the stock rise 2%, and scenario three could result in the stock gaining 5%. Scenario two is the bank's base case.