US brokerage Morgan Stanley has raised its price target for Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) on higher-than-expected sales in the current quarter and the expected earnings contribution from its disposal of chip equipment maker ASML Holding NV shares later this year.
“We admit that we have been too negative on TSMC, given our concerns about smartphone shipments slowing down, but TSMC has overcome that by taking a higher share,” Taipei-based Morgan Stanley analyst Bill Lu (呂家璈) wrote in a research note issued on Friday.
“Having said that, we have trouble seeing more significant [market] share gains going forward. The stock is likely to rally [in the] short term on the ASML profit and the better-than-expected guidance,” Lu added, maintaining his “equal-weight” rating on the stock.
The analyst raised his price target for TSMC shares from NT$122 to NT$130, while lifting his estimates for TSMC’s earnings per share from NT$10.13 to NT$11.59 for this year and from NT$10.74 to NT$11.44 for next year.
TSMC, the world’s largest contract chipmaker, reported on Thursday that its net profit reached a quarterly record high of NT$79.99 billion (US$2.54 billion) in the fourth quarter of last year, driven by strong growth for its 20-nanometer process technology.
The Hsinchu-based company forecast that its consolidated revenue would be flat quarter-on-quarter in the first three months of this year, a traditional slow season for the electronics industry, because global demand remains healthy.
TSMC also said it has started to offload its holdings in Netherlands-based semiconductor manufacturing equipment supplier ASML over a two-year time frame, which could help it book about NT$21 billion in earnings for this year’s financial report and boost earnings per share by NT$0.75.
However, investors still have concerns about the possibility that Apple Inc, a major TSMC client, might diversify suppliers for its next-generation chips to include South Korea’s Samsung Electronics Co rather than allocating all orders to TSMC, which Lu described as an “inevitable” trend.
“The question is really more one of timing. Our view has been that TSMC will keep the majority of the business in 2015, but Samsung will have more in 2016,” Lu said in the note.
TSMC shares gained 4.18 percent to NT$137 in Taipei trading on Friday.
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