Taiwan Semiconductor Mfg. Co. Ltd. (ADR)(NYSE: TSM)

TSMC Earnings Expectations.....

Taiwan Semiconductor earnings were presented on Thursday, December 13, 2022, before the market opened.

The consensus earnings estimate was for $1.14 per share on revenue of $16.10 billion; but the Whisper number was a little better at $1.17 per share. The reported EPS for the same quarter last year was $0.97.

Consensus estimates were for year-over-year earnings growth of 17.53% with revenue increasing by 27.01%.

Short interest has decreased by 21.1% and overall earnings estimates have been revised lower since the company's last earnings release.

With TSMC guidance of revenue and gross margin for 2022 from the proposed 20% price hike, there is still ~13% upside over current share prices

TSMC's revenue guidance could be conservative, given the 20% price hike and increased demand that will keep fab utilization rates high. Plus, TSMC's AA-/Aa3 credit rating allows for a substantially low cost of borrowing, which they could use to tap the debt markets to fund its capex plan if it needs (and lower its total cost of capital).

Actual TSMC Report.....

TSMC reported its fourth-quarter earnings before the U.S. markets opened on Thursday, and they were good: TSMC earned $1.15 per share on $15.74 billion in revenue, up 6.4% and 5.7%, respectively, from the third quarter -- and both above Wall Street's estimates. 

The company's sales in that quarter rose across the board, with increased demand for chips for smartphones, high-performance computing, internet of things, e-vehicles and various consumer electronics.

In the fourth quarter, shipments of 5-nanometer chips accounted for 23% of total wafer revenue. Meanwhile, 7-nanometer chips accounted for 27% of wafer revenue. Manufacturers measure circuit widths on chips in nanometers, or one-billionth of a meter.

Smartphone chips accounted for 44% of Taiwan Semi's revenue in the December quarter. High-performance computing chips made up 37% of revenue in the period.

Members Profits on TSMC Trade.....

Weekly Options USA Members entered this trade on Wednesday, January 05, 2022 for approximately $3.15 – less than the $4.00 suggested – but due to the market volatility experienced at that period of time, the price of the option slipped below the stop-loss of 60% that many traders insist on having.

However, as stated in the recommended trade this stop-loss is flexible.....

NOTE: Personally, due to the volatility the market is experiencing as well as the fact that I am hands-on, I do not use a protective stop loss, but do have a flexible pre-determined sell point – I am not pushing for 100% unless I feel that it has the legs to accomplish this!)

Members that held the trade would have been up 378% after the earnings report!

To view the actual trade sent to members CLICK HERE.

Also, traders that decided to implement an options trade after the article titled “Taiwan Semiconductor Earnings” and executing a weekly options trade would be very happy with the result.

Bullish Outlook.....

TSMC's revenue was up 25% in 2021 from 2020, but chief financial officer Wendell Huang said during the earnings call that the company expects an even larger year-over-year percentage gain in 2022, possibly close to 30%.

"Every year, our capex is spent in anticipation of the growth that will follow," Huang said.

Amid an ongoing global shortage of semiconductors, TSMC is going big. The company expects between $40 billion and $44 billion in capital expenditures (capex) this year, upgrading and expanding its manufacturing capacity around the world. 

Moving Forward.....

Strong demand for 5-nanometer chips gave the company tremendous operating leverage, helping drive its operating margin to 41.7% for the quarter, above its own guidance. 

As for the current (first) quarter, CFO Wendell Huang said that chip investors can expect incremental sequential gains in revenue and margins, supported by recovering demand from automotive clients and "milder smartphone seasonality than in recent years."

Spending Plans.....

Amid an ongoing global shortage of semiconductors, TSMC is going big. The company expects between $40 billion and $44 billion in capital expenditures (capex) this year, upgrading and expanding its manufacturing capacity around the world. 

"Every year, our capex is spent in anticipation of the growth that will follow in the future years," Huang said. "We are witnessing a structural increase in underlying semiconductor demand underpinned by the industry megatrends of 5G-related and HPC applications."

The heightened spending on semiconductor equipment is positive news for chip-gear makers such as ASML (ASML), Applied Materials (AMAT) and Lam Research (LRCX).

Analysts Happy.....

Taiwan Semi's results point to a "stronger for longer" chip cycle, Needham analyst Charles Shi said in a note to clients. He raised his price target on TSMC stock to $152 from $138 and reiterated his buy rating.

Therefore…..

We Have Another Successful TSMC Trade!

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