Taiwan Semiconductor is entering a new era for the industry from a position of strength, according to Loop Capital Markets, and that could make the stock a winner for investors. Analyst Charles Park began TSMC’s coverage with a buy rating, saying the chipmaker would soon reap the rewards of recent internal investments. “While a semiconductor inventory-driven cyclical peak could lead to a mid-cycle correction in the near term, we believe TSMC’s core business will remain strong through the cycle. TSMC’s strong investment in capex will drive higher revenues and Earnings should increase, similar to what the company experienced a decade ago when TSMC’s capital expenditure intensity increased to 50% in 2010-2013, leading to higher earnings later,” Parks wrote. Loop project earnings and revenue for TSMC to grow at double-digit rates by 2024 and to more than triple free cash flow over that period. Loop said those strong fundamental numbers and production efficiencies should make the company a winner as next-generation computing gains steam. “We believe that the semiconductor industry is entering a new phase of growth, driven by a collection of technologies (including 5G, AI/ML/Cloud, IoT, EV/ADAS, etc.) We believe we are in the early stages of this growth for the semiconductor industry, with TSMC ideally positioned to profit,” Park wrote. TSMC stock has fallen sharply this year, with its US-traded shares down more than 27%. Loop set a price target for TSMC at $600 Taiwanese per share, which is about 20% upside for the stock. —CNBC’s Michael Bloom contributed to this report.
