For Immediate Release
Chicago, IL – October 19, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include
Taiwan Semiconductor Manufacturing Company ( TSM Quick Quote TSM - Free Report) , Apple ( AAPL Quick Quote AAPL - Free Report) , NVIDIA ( NVDA Quick Quote NVDA - Free Report) , Qualcomm ( QCOM Quick Quote QCOM - Free Report) and Texas Instruments ( TXN Quick Quote TXN - Free Report) . Here are highlights from Friday’s Analyst Blog: What Taiwan Semi Earnings Indicates About These Top Tech Stocks
Taiwan Semiconductor Manufacturing Company missed the Zacks Consensus Estimate on both the top and bottom lines and the shares moved marginally lower in response.
Any other company would have been punished more severely. But Wall Street is already aware that this is the number one semiconductor company, possessing all the leading-edge manufacturing technologies that tech leaders like Apple, NVIDIA and Qualcomm rely on. To a lesser extent, we have Texas Instruments also dependent on it since they outsource some chip manufacturing to the company.
To be fair, TSM grew revenue and earnings over 29% and over 45%, respectively, from the September 2019 quarter, which is no mean feat. But street estimates jumped 11 cents on average 7 days ago, which was a couple of cents higher than what the Zacks Rank #2 (Buy) company actually achieved.
The revenue distribution by platform clearly shows smartphones as the largest segment, comprising a 46% share, followed by high-performance computing (HPC) at 37% and the Internet of Things (IoT) at 9%.
While Apple is its largest customer, it was the HPC segment (likely NVIDIA grew the strongest. HPC in fact is expected to remain the strongest growth driver over the next few years. Its 25% growth was followed by an almost equally strong IoT segment that grew 24%.
Smartphones only came thereafter with 12% growth, but it’s commendable considering that the market isn’t so strong any more. It’s only the growing silicon per phone and the company’s own share gains that’s allowing it to grow at these levels.
7nm now makes up the largest share at 35%, followed by 16nm at 18% and 5nm at 8%. The company’s strategy of de-emphasizing 10nm to jump to 7 has clearly paid off.
In what appears to be clear a reference to the above companies, CEO C. C. Wei said on the call: “Moving into the fourth quarter 2020, we expect our sequential growth to be supported by strong demand for our industry-leading 5 nanometer technology, driven by 5G smartphone launches and HPC-related applications.”
Moreover, there’s the expectation that customers will maintain above-seasonal inventory levels, because of concerns about supply chain issues. As a result, TSM is seeing stronger-than-expected demand.
So the company now expects to grow 30% in 2020, faster than the 20% growth expected of the foundry industry and mid-single-digit growth expected of the semiconductor industry, based on its achieving the industry sweet spot with process leadership that’s on time to catch the 5G and HPC revolutions.
Implications for Apple et al-
TSM is its main foundry partner and management commentary on the earnings call appeared to directly refer to Apple. From these, it appears that Apple will have a strong fourth quarter. But because it will build some inventory, sales may not be as strong as prior launches.
This Zacks Rank #3 (Hold) company has an earnings expected surprise prediction (ESP) of 1.29%, indicating that it will beat estimates.
It does look very good for NVIDIA, not only this quarter but also the next few years.
This Zacks Rank #3 (Hold) company has an earnings expected surprise prediction (ESP) of 1.75%, indicating that it will beat estimates.
TSM was its largest foundry partner last year and will likely be so this year as well. But the company is also expanding its supplier base as Samsung’s 5nm process comes online.
This Zacks Rank #3 (Hold) company has an earnings expected surprise prediction (ESP) of -31.0%, so we don’t know if it will beat estimates. It has however topped estimates in each of the last four quarters at an average rate of 14.3%.
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