Despite widespread consensus among analysts about a cyclical upturn for Taiwan Semiconductor Manufacturing Co (TSMC,
"TSMC stock has produced investment returns of 40 percent over the past nine months, including a NT$2.0 cash dividend and 5-percent stock dividend, and has outperformed Taiwan's market by more than 30 percent," Morgan Stanley's foundry analyst Sunil Gupta said in a report yesterday.
Shares of TSMC closed at NT$56.60 on Friday on the Taiwan Stock Exchange, down 0.7 percent from a day earlier. The stock market was closed yesterday as Typhoon Haitang lashed the country.
Gupta said TSMC's stock price has largely been factored into the next upside in the cycle, suggesting a share price peak between now and September.
Therefore, Morgan Stanley decided to downgrade TSMC to "equal-weight" from "overweight," while retaining its price target at NT$62, he wrote in the report.
The analyst listed as many as 10 reasons for the downgrade. But he stressed that expectations for improving macroeconomic growth had the market factoring in unrealistically high growth for end-markets, such as personal computers (PCs) and handsets.
In addition, he cited inventory risk, which may start growing in the fourth quarter of this year, as well as a consensus of expectations for TSMC that have already met optimistic double-digit growth in the global semiconductor market next year.
The overly high expectations, combined with foreign investors' already all-time-high 61.5-percent stake in TSMC and stock overhang caused by the sale of up to 210 million American Depositary Receipts -- US$1.7billion worth of stocks -- are likely to limit share price performance, Gupta added.
In contrast, JP Morgan Chase & Co suggested last week cashing in on shares of TSMC and its smaller rival United United Microelectronics Corp (UMC, 聯電), citing the chipmakers' expected double-digit growth in shipments in the next half of this year, driven by strong chip demands from PC, graphic cards for handsets and game consoles after current quarter.
UMC shares closed at NT$24.55 last Friday, dropped 2.6 percent from the previous day.
TSMC reportedly expected its wafer shipments in the current quarter to jump by 29 percent from the previous quarter to over 1.5 million pieces with a capacity utilization rate rising to 94 percent from about 84 percent in the second quarter, growing by 9 percent quarter-on-quarter to about 1.63 million in the fourth, according to Chinese-language reports last week.
The company, scheduled to hold an investor conference on July 26 to announce its second-quarter performance, yesterday said the typhoon hadn't impacted its production in Hsinchu Science-based Industrial Park (新竹科學園區).
"Typhoons usually don't influence our operations and this one didn't," TSMC spokesman Tzeng Jinnhaw (
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