Daiwa Securities on Wednesday upgraded its recommendation for Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) shares, forecasting that the world’s largest contract chipmaker would make a comeback in the second quarter from the seasonal slowdown that affected it in the previous two quarters.
In a research note, Daiwa Securities gave TSMC’s shares an “outperform” rating — an upgrade from “hold” — and raised its target price on the stock to NT$117 from NT$107.
TSMC’s shares rose 1.45 percent to close at NT$105 on the Taiwan Stock Exchange yesterday on the back of buying sparked by the gains on the tech-heavy NASDAQ index overnight.
The company is expected to see a 6 percent sequential decline in its consolidated sales for the first quarter of the year, amid inventory adjustments that continued from the fourth quarter of last year, according to Daiwa Securities.
TSMC’s first-quarter wafer shipments are likely to fall 3 to 5 percent from the previous quarter, while its average selling price could drop about 2 percent quarter-on-quarter, the brokerage said.
However, once it emerges from the slow season, TSMC’s consolidated sales for the second quarter are expected to grow 21 percent from the first quarter, driven by increased demand for smartphone chips, Daiwa Securities forecast.
The chipmaker’s average selling price for the April-to-June period is also likely to recover, the brokerage said.
It forecast that TSMC would receive a boost from Apple Inc orders, with chips sales from the advanced 20 nanometer process accelerating in the second quarter.
The brokerage forecast that Apple’s orders would make up about 5 percent of TSMC’s total sales this year.
In the fourth quarter of last year, TSMC posted NT$145.81 billion (US$239 billion) in consolidated sales, down 10.3 percent from a quarter earlier on inventory adjustments, in line with its projection of a 9.6 to 11.4 percent quarterly drop.
At an investors’ conference today, TSMC is expected to report NT$1.54 in earnings per share for the fourth quarter of last year, a decline from the NT$2 it posted in the previous quarter, according to Daiwa Securities.