Taiwan Semiconductor Manufacturing Company Limited

(New York Stock Exchange)
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Somewhat Bullish +50

Taiwan Semiconductor is Right Back to Where It Was a Month Ago: Pull The Trigger?

Capacity expansion Earnings report Financial outlook AI-generated analysis

πŸ“ˆ TSMC delivered its sixth consecutive record profit quarter with Q3 EPS of $4.60 and revenue of $46.7 billion, beating analyst expectations.

πŸš€ Management raised full-year growth guidance to approximately 44%, up from the initial estimate of close to 30%.

πŸ’° Gross margins slipped to 66.4% as the company ramps production for its new 2nm process node.

πŸ—οΈ Planned capital expenditures for 2026 are estimated between $60 billion and $64 billion, with further increases expected through 2028.

πŸ“‰ The stock price has declined roughly 13% over the past month, trading at $422.40 despite strong earnings.

🌍 Overseas fabs are expected to shave an additional 3-4% off gross margins this year due to operational complexities.

πŸ”­ Q4 revenue guidance implies 58% year-over-year growth at the midpoint, indicating robust demand.

πŸ“Š Twenty of twenty-one analysts rate TSM as a Buy or Strong Buy with a consensus price target of $578.22.

⚠️ Management flagged weakness in consumer and price-sensitive markets alongside geopolitical risks in Taiwan.

πŸ”‹ Arizona's second fab is scheduled to start volume production in the third quarter of 2027.

Bullish Signals
  • TSMC delivered its sixth consecutive record profit quarter with Q3 EPS of $4.60 and revenue of $46.7 billion, beating analyst expectations.
  • Management raised full-year growth guidance to approximately 44%, up from the initial estimate of close to 30%.
  • Q4 revenue guidance implies 58% year-over-year growth at the midpoint, indicating robust demand.
  • Twenty of twenty-one analysts rate TSM as a Buy or Strong Buy with a consensus price target of $578.22.
Risk Factors
  • Gross margins slipped to 66.4% as the company ramps production for its new 2nm process node.
  • Planned capital expenditures for 2026 are estimated between $60 billion and $64 billion, with further increases expected through 2028.
  • Overseas fabs are expected to shave an additional 3-4% off gross margins this year due to operational complexities.
  • Management flagged weakness in consumer and price-sensitive markets alongside geopolitical risks in Taiwan.
Full Analysis
Taiwan Semiconductor Manufacturing (TSM) reported its sixth consecutive quarter of record profits in the third quarter, with earnings per share of $4.60 beating consensus estimates and revenue of $46.7 billion exceeding guidance. Consequently, management raised its full-year growth outlook to approximately 44%, up from an earlier estimate near 30%. Despite these strong operational results, the stock price has declined roughly 13% over the past month, trading at $422.40, which is significantly below its 52-week high of $487.47. The company faces headwinds related to margin compression and substantial capital expenditure requirements as it ramps up production for its next-generation 2nm process node. Gross margins slipped to 66.4% from the previous quarter, and management anticipates further pressure from overseas fabs that could reduce margins by an additional 3-4%. Planned capital expenditures for 2026 are estimated between $60 billion and $64 billion, with spending expected to increase significantly through 2028. Analysts remain largely bullish on the stock, with twenty out of twenty-one analysts rating TSM as a Buy or Strong Buy. The consensus price target implies nearly 37% upside from current levels, driven by strong AI demand and raised revenue guidance for the fourth quarter. However, investors are cautious about potential geopolitical risks in Taiwan and the high valuation multiples, including a trailing P/E of 32 and a forward P/E of 21.