On Monday, Bernstein analysts maintained their Outperform rating on shares of Taiwan Semiconductor Manufacturing Company (NYSE:TSM), with a steady price target of $258. According to InvestingPro data, TSM currently trades at $201.62, with analyst targets ranging from $180 to $265. The company, which commands a market capitalization of $861.5 billion, currently appears slightly overvalued based on InvestingPro's Fair Value analysis.
In light of the company's latest financial disclosures, Bernstein highlighted Taiwan Semi's December revenue, which showed a modest month-on-month increase of 0.8% and a significant year-on-year surge of 58%. The fourth quarter of 2024 saw revenues accumulate to NT$868 billion, marking a 14% rise from the previous quarter.
Taiwan Semi's fourth-quarter revenue exceeded market consensus by 1.9% and was 2.4% higher than the company's own guidance midpoint. Adjusting for foreign exchange effects, the outperformance was around 1%. The company's strong performance is reflected in its impressive financial metrics, with InvestingPro data showing a robust revenue growth of 22.7% over the last twelve months and an EBITDA of $56.4 billion.
TSM maintains a "GREAT" financial health score of 3.34 out of 5, particularly excelling in profitability with a score of 4.42. Bernstein's analysis suggests that the sectors of artificial intelligence (AI), central processing units (CPU), and mobile technology will underpin the company's growth in 2025. However, they also cautioned investors about potential margin pressures stemming from depreciation costs associated with the new U.S. fabrication plant.
Bernstein remains optimistic about the company's prospects, citing robust demand in AI leading to rapid capacity expansion. They argue that Taiwan Semi's leading technology, cost efficiency, and execution capabilities should mitigate concerns about the sustainability of AI demand. These factors are expected to help offset slower recovery and competition in older technology nodes, potentially leading to approximately 30% earnings per share (EPS) growth in 2025 and an additional 24% in 2026.
The firm anticipates strong revenue guidance for the first quarter of 2025 but adopts a conservative stance on margins due to the anticipated sudden increase in depreciation from the new U.S. fab, which started production towards the end of the previous year. Despite these considerations, Taiwan Semi's valuation metrics show promise, with a P/E ratio of 27.5x and an impressive return on equity of 28%.
For deeper insights into TSM's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 top US stocks with detailed analysis and actionable intelligence. Bernstein reaffirms their Outperform rating and sets a price target of NT$1,380, naming Taiwan Semi as their top pick for 2025.
In other recent news, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) has been the focus of several analyst firms following robust earnings and revenue results. Goldman Sachs (NYSE:GS) maintained a Conviction Buy rating on TSMC, anticipating a 26.8% year-over-year revenue growth in 2025, supported by strong demand for leading-edge nodes. The firm also expects TSMC to implement strategic price increases in 2025, contributing to gross margin expansion.
On the other hand, Bernstein maintained an Outperform rating on TSMC, highlighting the company's impressive growth driven by gains in artificial intelligence (AI), central processing units (CPUs), and mobile technologies. The firm projects a 30% growth in earnings per share (EPS) for TSMC in 2025.
Nomura/Instinet also maintained a Buy rating on TSMC, increasing the price target based on a forecasted 2025 EPS. The firm emphasized the role of AI in driving demand and expects TSMC's gross margin to become a new standard due to favorable pricing dynamics and efficiency improvements.
BofA Securities raised the price target on TSMC, reiterating a Buy rating. The firm cited TSMC's advances in AI, improved yields of its N3 technology, and increasing demand for advanced processing nodes as factors contributing to TSMC's structural earnings growth.
Lastly, UBS maintained its Buy rating on TSMC and increased the price target. The firm expects TSMC's gross margin to rise further in 2025, considering factors such as a price increase on N5/3 technologies, improved utilization, and a decrease in N3 dilution.
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