Semiconductors, also called microchips, are a highlight of technology – they exist in almost every aspect of our lives. From freezers to computers, they allow the devices we rely on daily to work smoothly and efficiently.
Now that the music has seemingly been shut off in 2022, the fun for semiconductor companies has halted. We’ve seen deep double-digit valuation slashes across most of the industry year-to-date. The chart below illustrates the year-to-date performance of SOXX, the iShares Semiconductor ETF.
Image Source: Zacks Investment Research
As we can see, it’s undoubtedly been a brutal stretch for semiconductor companies.
Taiwan Semiconductor Manufacturing
TSM
, the world’s largest circuit foundry, is on deck to report quarterly results this week. TSM is a Zacks Rank #3 (Hold) with an overall VGM Score of a B.
There will be many eyes on this quarterly report, as TSM is responsible for supplying many of the microchips globally to a list of companies, including Apple
AAPL
, Nvidia
NVDA
, and Advanced Micro Devices
AMD
.
Let’s dig a little deeper to see how the company stands heading into the quarterly report; TSM reports before the opening bell on Thursday.
Share Performance & Valuation
Year-to-date, TSM shares have tumbled, decreasing nearly 34% in value and extensively underperforming the S&P 500.
Image Source: Zacks Investment Research
Upon widening the timeframe to encompass the last year, we can see that TSM shares were on an uptrend throughout the majority of 2021 but broke off near the beginning of 2022.
Image Source: Zacks Investment Research
TSM sports an enticing 13.4X forward earnings multiple, well below its five-year median value of 19.9X and a fraction of its 34.9X high in 2021. Additionally, shares trade at an attractive 22% discount relative to the S&P 500.
Image Source: Zacks Investment Research
Quarterly Performance & Share Reactions
TSM has consistently reported quarterly EPS above expectations, exceeding bottom-line forecasts in nine of its last ten quarters. The average EPS surprise over the previous four quarters is a respectable 4.2%, and in its latest quarter, TSM beat bottom-line estimates by a notable 7%.
Top-line results have been mixed; the company has exceeded quarterly revenue estimates four times over its last eight quarters.
Additionally, the market has had mixed reactions to EPS beats; shares have moved upwards three times over its last six bottom-line beats.
Growth Estimates
Top and bottom-line estimates indicate a strong quarter from the company. For the quarter, TSM is forecasted to generate $18.7 billion in revenue, registering a robust double-digit growth in revenue of 41% from the year-ago quarter.
The bottom-line also appears to be in incredible shape, with the $1.47 Zacks Consensus EPS Estimate reflecting a stellar 60% increase in quarterly earnings year-over-year. Additionally, the Consensus Estimate Trend for the quarter has retraced marginally over the last 60 days.
Image Source: Zacks Investment Research
TSM sports a Style Score of an A for Growth.
Bottom Line
The quarterly report will be watched like a hawk, and for a good reason – TSM supplies chips to many of the tech titans in the market.
The poor share performance is undoubtedly disheartening, but I believe it’s presented investors with an opportunity to buy shares at a discount. Additionally, the company has solid valuation levels, and quarterly growth is forecasted to be substantial.
For these reasons, I’m optimistic heading into the company’s quarterly report.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
