Taiwan Semiconductor Manufacturing (TSM) – October Buy, Sell or Hold?

Posted On September 28, 2023 3:34 pm

Taiwanese chip giant Taiwan Semiconductor Manufacturing Company Limited (TSM) is pushing into overseas manufacturing, eyeing Japan as a suitable production base following its struggle to recruit workers for its Arizona facility. The company’s $8.6 billion under-construction Japanese hub is expected to start production in 2024.

Although the company is in talks with the Arizona government to attract more investment and address some challenges the company has faced in the state, the Arizona hub is anticipated to be delayed until 2025 due to a lack of specialty workers.

Moreover, for the second quarter, TSM’s revenue and net income dropped from their prior-year period values as the company was impacted by macroeconomic pressures. For the third quarter, while the company expects support from its 3-nanometer technologies, customers’ inventory adjustment could partially offset that gain.

Given this backdrop, let’s look at the trends of TSM’s key financial metrics to understand why it could be wise to wait for a better entry point in the stock.

Assessing Financial Performance: A Deep Dive into Taiwan Semiconductor Manufacturing

The trailing-12-month net income of TSM has demonstrated a positive trend over the observed time frame, growing from $499.84 billion in September 2020 to $941.95 billion in June 2023. Key points:

  • Between September 2020 and December 2020, TSM experienced a minor growth in net income from $499.84 billion to $517.89 billion.
  • From December 2020 to June 2021, the net income saw consistent yet slow growth, moving from $517.89 billion to $549.92 billion.
  • The growth accelerated in September 2021, reaching $568.86 billion, which continued to climb, reaching $596.54 billion by the end of December.
  • Significant growth was witnessed during 2022, with net income peak reaching $1.01 trillion in December 2022.
  • However, the first half of 2023 marked a downturn, with net income falling back to $941.95 billion in June 2023 after a minor drop at $997.17 billion in March 2023.

Overall, TSM’s net income has experienced an upward trend with steady growth patterns. However, the latter six months have seen some instability, with a significant dip observed. The growth rate from the first reported value to the last stands at approximately 88.45%, indicating a substantial increase over these years.

It should be noted that while the company’s profitability witnessed robust growth for the majority of the period, the recent dip suggests the need for enhanced focus on this aspect.

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