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TheStreet Open House

Why Taiwan Semiconductor (TSM) Is Up Today

NEW YORK (TheStreet) -- Taiwan Semiconductor  (TSM) was rising 1.88% to $18.38 at 11:46 a.m. on Wednesday after reports claimed that the world's largest dedicated independent semiconductor foundry had begun producing chips for Apple's  (AAPL) new iPhone.

The Commercial Times, based in Taipei, cited supply chain sources and reported Taiwan Semiconductor had started production on the A8, the processor for Apple's new iPhone, last month. It's unclear how this reported partnership would affect Samsung, Apple's current microchip supplier, though the reports have fueled speculation that Apple is trying to decrease its reliance on the South Korean company.

The Commercial Times also predicted the new iPhone, which would likely have a 4.7-inch screen, to arrive early in the third quarter.

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TheStreet Ratings team rates TAIWAN SEMICONDUCTOR MFG CO as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TAIWAN SEMICONDUCTOR MFG CO (TSM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. Among the primary strengths of the company is its revenue growth. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • TAIWAN SEMICONDUCTOR MFG CO reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TAIWAN SEMICONDUCTOR MFG CO increased its bottom line by earning $1.21 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $1.21).
  • In its most recent trading session, TSM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry average. The net income has decreased by 0.5% when compared to the same quarter one year ago, dropping from $1,466.10 million to $1,458.32 million.
  • You can view the full analysis from the report here: TSM Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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