TSM Stock Forecast and Price Target 2021

Today, I will analyze TSMC stocks in-depth with you.

In the semiconductor sector, TSMC has always been my most promising stock. TSMC has just announced its results for the fourth quarter of 2020. At the same time, there are new developments in the entire chip industry recently. Therefore, today I will combine the financial report and chips. The latest developments in the industry to analyze the trend of TSMC stocks,

First of all, we analyze TSMC’s fourth-quarter and full-year 2020 financial reports to see what are the key points worthy of investors’ attention.

First, TSMC’s fourth-quarter revenue and profitability are very good.

Compared with the outlook for Q4 in Q3, the outlook at that time was US$12.4-12.7 billion, and the actual revenue was US$12.68 billion. Actual revenue As the upper limit of the outlook, the gross profit margin outlook is 51.5%-53.5%, while the actual gross profit margin is 54%, which is better than the outlook.

The operating net profit margin is expected to be 40.5%-42.5%, and the actual operating net profit margin is 43.5%, which is much better than the outlook. Then compared with the same period of the year, revenue increased by 22% month-on-month and gross profit margin increased by 3.8%. Earnings per share increased by 23%,

At the same time, compared to the third quarter, regardless of revenue, gross profit margin, operating net profit margin, or earnings per share, all are positive growth, so I think this is a very good financial report.

TSMC’s gross profit margin increased from 50.2% in the fourth quarter of 2019 to 54% in the fourth quarter of 2020, indicating that TSMC’s high-end process demand is strong.

Looking at the full year of 2020, revenue increased by 31.4%, while earnings per share increased by 50%. Earnings growth was much faster than revenue growth. This shows that although TSMC has been increasing capital expenditures, due to the near-monopoly of high-end manufacturing processes, Taiwan Semiconductor Manufacturing Co., Ltd. can easily cover the cost by increasing the foundry price,

Second, TSMC’s outlook for the first quarter of 2021 is also very good.

TSMC’s revenue outlook is between US$12.7 billion and US$13 billion. The revenue for the first quarter of 2020 is US$10.31 billion. The upper limit of 130 million is estimated that its growth is 26.1%,

TSMC did not give a forecast for earnings per share. Taking into account the increase in its profit margin, it is expected that earnings per share will grow by about 30%. TSMC’s full-year EPS in 2020 is 3.39 US dollars. The current price of ADR in the US stock market is 126 dollars, so the P/E ratio is 126 divided by 3.39, which equals 37 times the P/E ratio.

And if we are a little bit ahead, we use the EPS of Q4 in 2020, that is, the EPS per quarter is 0.97 US dollars, and we estimate that the full-year EPS of 2021 will be 0.97*4=3.88 US dollars. Therefore, the P/E ratio can be estimated as 126/3.88. It is equal to 32.5 times the price-earnings ratio. I think this estimation method is relatively conservative.

Another estimation method is that if it is assumed that TSMC’s earnings per share can increase by 30% in 2021, the current price-to-earnings ratio of the stock price relative to the 2021 earnings is 29 times.

If you compare horizontally with American technology companies, even if the price of TSMC has risen considerably in the past few months, looking to the future, TSMC’s current stock price is still within a reasonable range.

Third, TSMC’s high-end process demand is strong,

In revenue, the proportion of revenue from 5 nanometers increased from 8% in the previous quarter to 20%.

The revenue share of 7nm decreased from 35% in the previous quarter to 29%.

The revenue contributed by the 16nm and below 16nm processes will increase from 50% in 2019 to 58% in 2020.

Because the proportion of advanced process revenue is higher, this can explain why TSMC’s profit growth is much faster than revenue growth, and why the gross profit margin continues to increase.

Fourth, compared with the company’s capital expenditure of approximately US$17.2 billion last year, TSMC announced that this year’s capital expenditure will reach US$25 billion to US$28 billion, far exceeding market expectations.

TSMC said that about 80% of its expenditures will be used in chip manufacturing with advanced processes such as 7nm, 5nm, and 3nm, as well as the 5nm wafer fab that the company will build in Arizona, USA,

I don’t think investors need to worry about the substantial increase in capital expenditure, because we see that the main reason for the increase in capital expenditure is the increase in demand for chip foundry. At the same time, the increase in capital expenditure can strengthen TSMC’s technical barriers. To widen the gap with Samsung, these capital expenditures are necessary.

The biggest beneficiary of the competition between TSMC and Samsung on capital expenditure will be the upstream ASML company.

On the other hand, with the evolution of the process to 3 nanometers and 1 nanometer, EUV lithography machines are already standard configuration, so ASML, which monopolizes EUV lithography machines, is also worthy of special attention by investors.

After talking about TSMC’s fourth-quarter quarterly report and looking at industry trends, there is still much good news from TSMC shortly. One is that Qualcomm’s latest Snapdragon 888 chip has unexpectedly encountered some problems. As some reviewers got it equipped with Snapdragon The Xiaomi Mi 11 with 888 chip, some reviewers found that Xiaomi Mi 11 had problems such as overheating and dropped frames in the test. This inevitably makes people worry that the Snapdragon 888 may repeat the mistakes of the Snapdragon 810 with too high power consumption.

The Snapdragon 888 is produced by Samsung with a 5nm process, because now only Xiaomi Mi 11 phones are equipped with the Snapdragon 888 chip. The evaluation results may not be representative. As more and more high-end mobile phones equipped with the Snapdragon 888 chip are launched, there will be more tests that have come out, if Qualcomm’s chips go wrong again, there is a high probability that Qualcomm will abandon Samsung in the future.

Turning to TSMC again, investors must pay attention to the extent to which this matter will ferment. Also, Intel has changed its CEO, and the new CEO will be able to drastically change Intel’s existing structure. I think Intel is gradually abandoning chip manufacturing. And seeking foundry is a high probability event,

At this stage, Intel must contact Samsung and TSMC at the same time, to increase the weight of the negotiation.

Because of TSMC’s leading process, the chance of TSMC winning Intel’s orders is very high. Even if Intel is declining, Intel is still a big customer. Therefore, if the news of Intel looking for TSMC foundry is released in the future, TSMC will usher in another round of surges.

It is also possible that because of the confidentiality of customers, Intel does not say, and TSMC can not actively release the news. If so, investors need to think for themselves to conduct an in-depth analysis of the ins and outs. No matter what, the stock price of TSMC is down. The trigger point of a big rise may be related to Intel.

Therefore, whether you look at TSMC’s latest financial report or the recent trends of Qualcomm and Intel, TSMC’s good news continues. Now that the epidemic will not pass immediately, and the digital transformation of mankind is still accelerating, so the entire chip industry Will still be thriving and full of life in 2021,

According to my preliminary estimation, TSMC’s stock price is still within a reasonable range. I expect that even if TSMC has risen a lot from the beginning of 2021 to now, TSMC’s stock price will continue to follow the performance of TSMC in the future. The growth is realized and the tide rises,

At the same time, the growth of chip demand has driven the growth of TSMC, and the growth of TSMC and the competition with Samsung will greatly benefit ASML, so ASML also deserves special attention.

If the chip industry is too obscure for you, and you believe in the overall development of the chip industry, you can consider ETFs, such as the ETF that tracks the Philadelphia Semiconductor Index, coded as SOXX. Of course, I have to emphasize that the overall semiconductor market has risen recently. It's too fast and too fierce, please be careful not to chase the risk,

The conclusions mentioned here and the conclusions obtained are all long-term trends. Put a long line to catch big fish. There are opportunities. Sometimes you need to be patient and wait for a good opportunity to enter the market.

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