Wedbush believes that TSMC’s revenue development in August is encouraging, but should not be regarded as a major turning point in the company’s short-term prospects. TSMC released its August revenue report earlier this week, which showed a significant increase in monthly revenue. The increase is believed to come primarily from orders from Apple and NVIDIA, putting TSMC in a good position to meet its third-quarter revenue target.
The report comes as concerns over China’s ban on iPhone use in executive offices have created some uncertainty for TSMC’s stock price and reduced the company’s market value on the Taiwan Exchange from the $14 trillion level.
2023 is proving to be quite a shock to TSMC management, as the company has experienced explosive growth in the past few years following the coronavirus pandemic. As demand for technology products expands, orders from TSMC's customers also grow; however, this growth also leads to too many product shipments entering the market, resulting in product surplus and weakening product demand from back-end chip companies.
As a result, TSMC’s sales in August increased by 6% compared with July, marking the second consecutive month of sales growth for TSMC. Since the beginning of this year, TSMC's performance has varied greatly, with serious declines occurring every month. But looking at the full year, revenue has been down in most months of the year as sales shrink and orders slow.
Wedbush's Matt Bryson cautioned after the results that while revenue results put TSMC's third-quarter results on a solid path, there have been few "meaningful" changes in the broader business environment, which could provide surprises in the third quarter.
According to Bryson, technology companies that account for the majority of TSMC’s orders have given bleak guidance for the second half of this year, which naturally sets a ceiling for TSMC’s order growth. The Taiwanese company's second-quarter earnings were rather muted, as TSMC cut its annual revenue guidance for 2023 for the second time and warned that the chip industry's slowdown was worse than expected.
Therefore, Wedbush did not change its revenue forecast for the September quarter based on the August financial report. The company still gives TSMC a positive rating and a target stock price of NT$650. TSMC's latest closing price on the Taiwan Stock Exchange was NT$539, with its stock price rising 20.5%. In the long term, TSMC's stock price is expected to benefit from the growth of artificial intelligence and electric vehicles, as the growth of market applications will bring more orders to the company.
TSMC's stock price also fell slightly on the stock market following news that China had banned the use of iPhones in central agency offices. However, analysts cautioned against overreacting to the news, with Evercore ISI reiterating its "outperform" rating on the stock and sticking to its $210 price target for Apple. The company believes government officials are already less likely to use iPhones, limiting the ban's impact on the Cupertino-based tech giant's revenue in China. Ives also said the ban could affect sales of about 50,000 iPhones, which is negligible for Apple, which sells millions of smartphones each year.