Will TSMC's Stock Price Rise After 40% Revenue Surge?
$Taiwan Semiconductor Manufacturing(TSM)$ released its September sales figures earlier today, posting a monthly revenue of NT$251.87 billion, up 39.6% year-on-year.
This brings TSMC’s Q3 revenue to NT$759.7 billion, up 38.9%!
In the Q2 earnings call, management forecast Q3 revenue is between $22.4 billion and $23.2 billion, assuming an exchange rate of USD/NTD 32.5.
Based on this, TSMC’s Q3 revenue was $23.38 billion, surpassing the high end of the guidance and beating Bloomberg’s forecast of $23.26 billion!
1.TSMC's September Revenue Surge
So, can TSMC’s stock price hit a new high after this earnings surprise? Can the market cap return to the trillion-dollar club?
Let's take a step back. History shows that strong monthly revenue growth doesn’t always mean the stock price will follow suit. Take 2022, for instance: TSMC’s revenue soared by 42.6%, but the stock price tumbled 38%!
Look at March-May 2018—monthly revenue grew by 20.7%, 43.9%, and 11.3%, yet the stock fell 11% during the same period.
2.Revenue Growth vs. Stock Price
Clearly, TSMC’s stock price doesn’t directly correlate with monthly earnings. In fact, sometimes the relationship seems inverse. From July to September this year, TSMC’s monthly revenue growth was over 33%, but the stock still trended down.
If the stock price isn't tightly linked to monthly performance, what does it depend on? Comparing TSMC’s movements with the $NASDAQ(.IXIC)$ , the connection is obvious!
For example, on January 13, 2022, TSMC’s stock hit its peak before starting to drop, just weeks after the Nasdaq peaked on November 22, 2021.
In 2018, both TSMC and the Nasdaq moved in sync as U.S. stocks tumbled.
Bottom line? TSMC is closely tied to the Nasdaq. As long as the Nasdaq doesn’t peak, TSMC’s rally likely continues. Conversely, as long as TSMC keeps climbing, the Nasdaq may also stay in an upward trend.
From a valuation standpoint, TSMC’s price-to-book ratio hasn’t reached the peak of the previous bull market, meaning there’s still room to grow.
Meanwhile, the Nasdaq’s P/E ratio is sitting at historical highs.
But the market right now only cares about three things:
Will the Fed cut rates?
Will the U.S. economy have a hard landing?
Can AI stocks, led by $NVIDIA Corp(NVDA)$ , continue to thrive?
3.Nvidia's Impact on TSMC
On interest rates, a significant cut could signal trouble for the real economy and trigger a market sell-off. A gradual 0.25 basis point cut likely won’t have much impact.
As of now, there’s no clear sign the U.S. economy is heading for a hard landing, but it’s something to watch.
As for AI, Nvidia and other semiconductor stocks are nearing all-time highs. According to Foxconn’s chairman yesterday, demand for Nvidia’s AI servers remains strong, so there’s no sign of a supply glut yet.
Chances are Nvidia will hit new highs, giving TSMC a shot at reclaiming its trillion-dollar market cap!
As for upside potential? Let’s ballpark it—maybe 30%!
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