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TSMC price target hiked at Bernstein on more CoWoS capacity, possible node price hikes

Published 06/20/2024, 04:34 AM
Updated 06/20/2024, 05:36 AM
© Reuters TSMC stock price target hiked at Bernstein on more CoWoS capacity, node price hikes
(Updated - June 20, 2024 5:32 AM EDT)

Bernstein analysts lifted their price targets for TSMC’s (TSM) Taiwan and US-listed shares on Thursday. The new price target for Taiwan stock stands at NT$1,080, up from NT$900. For US-listed shares, Bernstein raised the price objective to $200 from $150.

The investment firm expects TSMC to surpass its 2024 guidance, driven by high-end phone demand and advanced technology nodes. The company's data center AI revenue is on the rise, aligning with projections. However, an unexpected boost has come from AI's influence on smartphone upgrades.

“N3 & N5 capacity is full now,” analysts noted. “We expect 3Q24 revenue guide to beat & 2024 full-year USD revenue to rise by 25% & EPS by 28%.”

Most notably, the firm projects that EPS could see an additional 26% increase in 2026, citing continued demand for its Chip-on-Wafer-on-Substrate (CoWoS) technology, the earlier-than-expected launch of Intel’s (INTC) Lunar Lake, and a potential price hike in advanced nodes.

Despite a lower-than-expected outsourcing volume from Intel (NASDAQ:INTC), TSMC's EPS is expected to maintain a mid-teens percentage growth in 2026. This is partly due to AMD (NASDAQ:AMD) joining Apple (NASDAQ:AAPL) as an early adopter of TSMC's N2 node technology. Moreover, TSMC is likely to retain some production of supporting tiles for Intel's Panther Lake, despite the latter's plan to move its compute tile back to its own 18A process.

Bernstein has also slightly adjusted its 2024 capital expenditure projections for TSMC upward due to CoWoS investments but has left the 2025 and 2026 estimates unchanged “as we need visibility on upcoming iPhone to better gauge the impact of Edge AI.”

With a forward price-to-earnings (P/E) ratio of 20 times, TSMC stock still trades at a discount of approximately 25% compared to the SOX index, which is near “record deep,” analysts highlight.

“20x is very reasonable in light of the rapid earnings growth & good visibility,” analysts added.

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