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TheStreet Open House

Why Taiwan Semiconductor (TSM) Stock Is Gaining Today

NEW YORK (TheStreet) -- Taiwan Semiconductor (TSM) shares are up 1.3% to $22.27 on Wednesday after analysts at JPMorgan (JPM) raised earnings estimates for the Apple (AAPL) supplier.

The firm raised its full year 2014 EPS estimates by 3% and its 2015 estimates by 2%, with increased revenue coming in the second half of this year just as Apple is set to launch the iPhone 6 and its latest iPad.

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The firm expects Apple orders to represent 13% of the company's third quarter revenue and 15% of its fourth quarter revenue, up from 4% in the second quarter.

"Given the staggered launch of new Apple products (iPhones in September, iPads in 4Q14 and a potential larger iPad in 1H15) which will all migrate to 20nm application processors at TSMC, we expect the strength for 20nm products to continue into 4Q14," said analysts at the firm.

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. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year, growth in earnings per share and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • TSM's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 9.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • TSM's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, TSM has a quick ratio of 1.77, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • TAIWAN SEMICONDUCTOR MFG CO has improved earnings per share by 15.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TAIWAN SEMICONDUCTOR MFG CO increased its bottom line by earning $1.18 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($1.46 versus $1.18).
  • The gross profit margin for TAIWAN SEMICONDUCTOR MFG CO is currently very high, coming in at 72.98%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 32.29% significantly outperformed against the industry average.
  • You can view the full analysis from the report here: TSM Ratings Report
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