Why TSMC (TSM) Stock is Moving Today

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Taiwan Semiconductor Manufacturing Co Ltd (TSM, Financial) witnessed a notable stock movement today, with shares climbing by 3.99%. This surge can be attributed to the recent announcement of their impressive Q2 earnings, which surpassed market expectations.

In the second quarter, TSMC reported earnings of $2.47 per American depositary receipt (ADR), beating the anticipated $2.28 per ADR. The company's quarterly sales reached NT$933.8 billion, approximately $30.1 billion USD. This represents a significant 38.6% year-over-year sales increase, and an even more substantial 44.4% increase in USD terms. The net profit growth for the quarter was an impressive 60.7%.

CFO Wendell Huang highlighted that the strong performance was driven primarily by the robust demand for AI and high-performance computing, with 74% of TSM's revenue derived from sales of advanced semiconductor wafers, particularly those at 7 nanometers or less. TSMC's gross profit margin stood at 58.6%, while the operating margin was 49.6%, and the net margin was 42.7%.

Looking ahead, Taiwan Semiconductor Manufacturing Co Ltd has forecasted Q3 revenue between $31.8 billion and $33 billion. They anticipate gross margins ranging from 55.5% to 57.5% and operating margins between 45.5% and 47.5%. However, it's worth noting that the expected Q3 growth of up to 38% may indicate a slowdown compared to Q2, alongside slightly lower profitability margins.

From a valuation standpoint, TSMC's stock exhibits a GF Value of $179.86, making it currently "Significantly Overvalued" according to GF Value. The stock has a price-to-earnings (P/E) ratio of 32.17, a price-to-book (P/B) ratio of 6.68, and a price-to-sales (P/S) ratio of 9.73. With a market capitalization of $1.281 trillion USD, TSMC maintains a strong financial position highlighted by an Altman Z-score of 9.2, indicating robust financial health.

Overall, TSMC continues to demonstrate strong financial strength with a high Piotroski F-score of 8, expanding operating margins, and a solid customer base that includes industry giants like Apple, AMD, and Nvidia. However, with its stock price close to a 10-year high, investors should weigh the current valuation against potential future growth.

Disclosures

I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.