TSM earnings preview: A $100B plan to ease the global chip shortage

Last week, TSM announced that it would invest a staggering $100B over the next three years to increase production capacity

Tech (2)

For those who haven’t been following along closely, there’s a massive shortage of semiconductor chips across the globe stemming from last year’s COVID-19 related supply chain disruptions. The ongoing shortage is impacting major industries from auto manufacturing to cell phones to medical equipment to consumer electronic devices, and Taiwan Semiconductor Manufacturing (TSM) is by far the dominant global producer at the center of the crisis.

See my colleague Rebecca Cattlin’s article on the key semiconductor chip companies to watch in 2021!

Despite running its plants at over 100% utilization, the company has still been unable to keep up with demand. Last week, TSM announced that it would invest a staggering $100B over the next three years to increase production capacity (including a $3.5B plant in the US) to address the current global backlog and accommodate a coming surge in demand around technologies like 5G service.

Earlier today, the firm reported its monthly sales figures showing a strong 16.7% rise in Q1 revenues to $12.7B as the global economy starts to emerge from COVID-induced lockdowns, but traders are most focused on TSM’s full earnings report next week.

When are TSM earnings?

Thursday, April 15 before the opening bell

TSM earnings expectations

$0.95 in EPS on $12.86B in revenues in Q1

TSM technical analysis

After more than tripling off its pandemic lows in the lower-$40s in less than a year, TSM has struggled since its peak above $140 in mid-February. The stock spent six weeks in a near-term bearish channel, briefly dipping below its 100-day EMA near $112, before recovering back toward this week’s consolidation range in the low-$120s:

 

Source: StoneX, TradingView

Looking ahead, TSM has a lot riding on next week’s earnings report. A strong release, coupled with optimistic guidance for the rest of the year, could quickly take the momentum-driven stock back toward its highs in the $140 area. Meanwhile, a disappointing earnings update may prompt longer-term bulls to take profits and push the shares down to retest the year-to-date low near $108.

Learn more about equity trading opportunities.


More from Tech Stocks

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.