Taiwan semiconductor manufacturing (TSM), the world’s leading chip foundry, beat expectations for the first quarter and traded higher for the current period on Thursday. TSM shares rose in early trade.
The company, better known as TSMC, earned $1.40 per U.S. share on sales of $17.57 billion in the March quarter. According to FactSet, analysts had expected TSMC to earn $1.27 per share on sales of $16.74 billion. In the year-ago period, TSMC earned 95 cents a share on revenue of $12.77 billion.
For the second quarter, TSMC forecast revenue of $17.6 billion to $18.2 billion. The median of $17.9 billion beats Wall Street’s consensus estimate of $17.33 billion.
Taiwan Semi forecast a gross profit margin of 56% to 58% for the June quarter. That’s up from 55.6% in the March quarter.
TSM stock rises
In today’s premarket trading session, TSM shares are up 1.6% to 103.07.
“Our business in the first quarter was supported by strong demand from HPC (high performance computing) and the automotive industry,” said CFO Wendell Huang in a press release.
He added, “Looking ahead to Q2 2022, we expect our business to continue to be supported by HPC and automotive-related demand, partially offset by smartphone seasonality.”
In the first quarter, shipments of 5-nanometer chips accounted for 20% of total wafer sales and 7-nanometer chips for 30%. Advanced technologies, defined as 7-nanometer and more advanced technologies, accounted for 50% of total wafer sales. Circuit widths on chips are measured in nanometers, which is one billionth of a meter.
Taiwan benefits half from technological changes
Wedbush Securities analyst Matt Bryson reiterated his outperform rating on TSM stock following the report.
“We continue to see TSMC benefiting from structural shifts in technology innovation that require higher semiconductor content (e.g. 5G, AI, etc.),” he said in a note to customers. “The resulting elevated growth rate for semis combined with TSMC’s continued stock gains should result in accelerated growth for TSMC over the medium term.”
TSMC has taken market share from intel (INTC), Bryson said.
According to the IBD Stock Checkup, TSM stock ranks 17th out of 44 stocks in the IBD group of semiconductor industries. It has a mediocre IBD composite rating of 69 out of 99. IBD’s composite rating combines five separate proprietary ratings into one user-friendly rating. The best growth stocks have a composite rating of 90 or better.
Since hitting a record high of 145 on Jan. 13, TSM stock is down 30% to close on Wednesday at 101.50.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories about consumer technology, software and semiconductor stocks.
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