Shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) have repeatedly hit new highs, but an equity analyst said the stock’s valuation remains within a reasonable range and any pullback would likely be technical.
The contract chipmaker’s historical price-to-earnings (P/E) ratio has ranged between 20 and 30, Cathay Futures Consultant Co (國泰證期) analyst Tsai Ming-han (蔡明翰) told Central News Agency.
With market consensus projecting that TSMC would post earnings per share of about NT$100 (US$3.17) this year, supported by strong global demand for artificial intelligence (AI) applications, and the stock currently trading at a P/E ratio of below 25, Tsai said the valuation remains within its historical range.
Photo: Ritchie B. Tongo, EPA
TSMC, which accounts for more than 40 percent of the local main board’s total value, yesterday fell 2.21 percent to close at NT$2,215 after hitting a day high of NT$2,280.
The stock’s downturn contributed about 400 points to the TAIEX’s losses, which closed down 94.90 points, or 0.24 percent, at the day’s low of 39,521.73, off a high of 40,101.23.
Goldman Sachs Group Inc, one of the foreign brokerages bullish on TSMC’s outlook, in early January set a target price of NT$2,330 for TSMC, on the back of projected growth in output of its advanced 2-nanometer process and high-end chip-on-wafer-on-substrate (CoWoS) chip packaging services amid the AI boom.
Among foreign brokerages, CLSA has set the highest target price at NT$3,030, followed by Citigroup Inc at NT$2,875, Nomura Holdings Inc at NT$2,800 and HSBC Holdings PLC at NT$2,820.
Among local brokerages, Yuanta Securities Co (元大證券) and KGI Securities Ltd (凱基證券) have set target prices of NT$2,600, while SinoPac Securities Co (永豐金證券) has set a target of NT$2,615.
Last week, the Financial Supervisory Commission announced that exchange-traded funds (ETFs) would be allowed to exceed the current 10 percent cap on holdings in a single stock if that stock accounts for more than 10 percent of total market value.
As TSMC is the only stock meeting that threshold, it is expected to be the main beneficiary of the new rule, which could provide further support for its share price.
However, TSMC would not be allowed to top 25 percent of any ETF’s net assets, the commission said.
Still, Tsai said that if TSMC were to approach NT$3,000, corresponding to a P/E ratio of above 29, the stock could face overheating risks and the broader market could come under pressure.
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