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The Taiwan Semiconductor Manufacturing Company (TSMC) reported its revenue for June on Monday which marked an 11% drop over the year ago figures. TSMC's June revenue was NT$156 billion, and during the first half of this year, the Taiwanese chipmaker's net sales stood at NT$989 billion. This marked a small drop over last year's figures when TSMC had brought in NT$ 1 trillion during H1 2022. However, despite this, industry sentiment indicates that the worst might be over for the company, as a slew of new orders and shipments can potentially help its sales during the ongoing quarter. At the same time, investment bank Goldman Sachs has increased its share price target for the firm, citing TSMC's advantages in semiconductor fabrication and its criticality to the supply chain for artificial intelligence products.
TSMC Share Price Target Raise To NT$700 By Goldman Sachs For A 14% Increase
TSMC's revenue for the first half of this year represents a 3.48% drop over the previous year's figures, indicating a solid ability of the firm to weather one of the worst crises that has hit the chip sector since growth boomed over the past couple of years. Estimates before the latest figures had expected as much as a 10% slowdown, and TSMC's ability to withstand the contraction is also reflected in TSMC's shares. The company's stock is up by 1.42% in the Taiwanese market at the time of writing and has benefited from the boom in sentiment for the artificial intelligence industry by registering 26% in gains so far this year.
Speaking of artificial intelligence, investment bank Goldman Sachs is out with a fresh report for TSMC. The bank has raised the company's share price target to NT$700. This upgrade comes after the bank had lowered the price target to NT$615 from NT$633 in May on fears that inventory was taking longer to clear out in the chip sector. The demand-supply mismatch generated by the coronavirus pandemic and exacerbated by high inflation has led to too many chip products in the market. Consequently, it has affected fabs like TSMC, which have to face lower orders than before.
Goldman Sachs adds to its share price target boost by also raising TSMC's profit forecast fir 2023 - 2025 between 1% and 3%, The bank also raised the fab's capital expenditure forecast by $500 million - a positive development that indicates TSMC anticipates orders to significantly grow to justify the additional spending.
The move also stirred up posts on online chat boards, where users pointed out that since TSMC's shares started to rise when Goldman had reduced its share price target, and the opposite might be true now as the price takes a downturn. However, so far, the shares are doing fine and are posting modest gains.
As far as what's in the firm's immediate future, TSMC is expected to post lower gross margins during the second quarter, with 7-nanometer and 5-nanometer products increasing their share in the firm's revenue pie. TSMC executives have previously warned that due to the inventory correction in the chip sector, the firm's revenue for 2023 can dip slightly. However, they have added that 2024 should mark a recovery.
Supply chain reports suggest that growth in orders from NVIDIA and cryptocurrency mining will boost 7nm and 5nm orders. They will also ensure that the second quarter results mark the proverbial bottom for TSMC's revenue, and wafer shipments should grow during the current quarter.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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