TSMC Set to Give Investors Peek at How Tech Industry Faring
TSMC Set to Give Investors Peek at How Tech Industry Holding Up
(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. is poised to give market watchers a key reading of how the tech industry is holding up as it convenes its first earnings call since the virus pandemic was declared.
The two main questions that analysts and investors want answered on Thursday are how orders from Apple Inc. are doing and how TSMC is navigating the risk the U.S. will curb its sales to Huawei Technologies Co. While TSMC will provide first-quarter results including net income, it is the guidance for the current quarter and rest of the year that will get the most attention.
Both Citigroup Inc. and Credit Suisse Group AG say they expect the company to at least temper the high expectations for sales it set in January, citing the impact of the virus. Citi said it may even “withdraw its guidance without giving a specific view” for the year.
At the start of 2020, the chipmaker said annual revenue growth can top the foundry industry’s expected 17% expansion. Also on the line are rallies by TSMC shares and the broader equity benchmark. The chipmaker accounts for nearly a quarter of the Taiex gauge, which Wednesday entered a bull market by climbing 20% from its March low. TSMC dropped as much as 1.6% in early trading Thursday, modestly outpacing broader declines in Taiwan stocks.
“The first-quarter earnings briefing by TSMC is one of the most important company events so far this year because investors are unclear about the virus’ impact on product demand,” said Diana Wu, a senior manager at Capital Securities Corp. “The company has broad-based products, and its update will help clarify the tech industry’s outlook.”
Apple gave investors cause for concern in February when it said it does not expect to meet its revenue guidance for the March quarter, citing work slowdowns and lower smartphone demand. The U.S. company will provide its next earnings update on April 30.
Another worry is Huawei, given the possibility that the U.S. will impose restrictions on semiconductor sales to the Chinese company by global corporations such as TSMC. Huawei accounts for nearly 10% of TSMC’s revenue, according to Bloomberg-compiled data.
In a note dated Tuesday, J.P.Morgan summed up the most pressing specific queries that investors will have for TSMC as they try to estimate “the right level of caution”:
- Has it seen any major changes to orders?
- How much of a slowdown can the market expect in 2020? What are the risks of an inventory correction in the second half as demand deteriorates?
- Will any key projects be delayed?
Brokerages are still bullish on TSMC, with only two of the 32 tracked by Bloomberg assigning a sell rating. The average target price is NT$342.38, which implies a gain of 20% from Wednesday’s close. That level is just shy of the stock’s record high of NT$346 hit in January.
Overseas investors have been dumping the shares as risk sentiment soured due to the virus outbreak. Foreign investors have already sold more than $6 billion of TSMC stock this year through Wednesday, reversing net purchases of $2.6 billion last year, according to exchange data compiled by Bloomberg.
TSMC will hold a conference call that can be heard via this link at 2 p.m. Thursday in Taiwan. Here are the average analyst estimates for its first quarter results:
- Net income (GAAP): NT$109.73 billion (8 analysts)
- Gross margin: 50.18% (6 analysts)
- Earnings per share: NT$4.23 (10 analysts)
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