[Earnings Preview] TSMC has a succession of good news just before financial results! Q2 net profit grew by as much as 30%?! Is it possible for the stock price to break through the $200 mark?

TSMC, the world's largest foundry company, is scheduled to announce 2024 Q2 financial results on the afternoon of 7/18. Riding on the wave of AI demand, the company's stock showed a very strong rise this year, and the year-to-date rate of increase exceeded 81%, recorded a record high, and the total market value also broke through 1 trillion dollars at one point. Ahead of financial results, analysts at several major banks have raised the company's target stock prices one after another, and they anticipate that the company will revise its sales forecast for the full year 2024 upward.

Sales for June, which the company recently announced, were 207.9 billion Taiwan dollars (approximately 6.4 billion dollars), an increase of 32.9% from the same period last year. According to that, TSMC's April-6 sales increased 40.1% from the same period last year, exceeding market expectations by 35.5%.

Regarding the 2nd quarter financial results, AI demand forecasts, capital investment plans for advanced processes and CoVOS packaging technology, price strategies for 2025 and 2026, and the impact of “rising variable costs of electricity, materials, chemicals, gas, and other things” in Taiwan after 2024/4 on gross profit margin for the second quarter are attracting attention.

Wall Street analysts' predictions
Morgan Stanley analysts say TSMC's for the second quarter of 2024Sales will increase 13% from the same period last year, and gross profit margin will be about the same as the first quarter of 2024 (~ 52%)It is anticipated, and due to continued demand for AI technology, TSMC'sThe sales growth rate for the full year 2024 will reach about 20%Expected. The bank raised the company's target share price by 9%, as the net profit margin is expected to rise further by raising the price in 2025.

City analyst Laura Chen predicts that TSMC's sales for the second quarter will increase 11% from the same period last year, and sales in 2024 will increase 29%. He stated that there is a possibility that TSMC will raise the full-year sales growth rate forecast to the latter half of the 20% range against the backdrop of strong order acceptance. Since the operating rate of the company's 3nm process has improved, there is a possibility that the gross profit margin for the second quarter will improve. There is a high possibility that TSMC's capital investment amount will reach 30 billion to 32 billion dollars, which is the upper limit of the 2024 guidance,It will further increase to 35 billion to 40 billion dollars in 2025It's called. Mr. ChenThe sales price of advanced nodes will increase by 5% to 10%I see that there is a possibility.

Bank of America Securities raised the target stock price of TSMC shares from 1040 Taiwan dollars to 1160 Taiwan dollars in the research report, maintained a “buy” rating, and reflected the rise in market demand and an improvement in sales price forecasts. The bank predicts that the average sales price (ASP) of TSMC's 3nm and 5nm products will rise from the middle to the latter half of the single-digit range in 2025 and 2026, and that 2nm ASP will also rise slightly.

The company is also benefiting from strong growth in industry-leading 3nm technology and strong AI-related demand, and predicts that this year will be a year of healthy growth. The company's 3nm market share is over 90%, and as orders increase,The production utilization rate will soar to 80% by the end of 2024, and the monthly production capacity will reach 0.12 million to 0.18 million sheets, contributing 20% of revenueIt is expected. The contribution of the 3nm process to sales and net profit in the second quarter is also attracting attention.

At the 24Q1 financial results briefing, the company maintained this year's capital investment guidance from 28 billion dollars to 32 billion dollars compared to 30.4 billion 50 million dollars last year,Spend 70% to 80% of that on advanced technologyIt was clarified. 2nm process chips are expected to bring significant revenue after the end of the first quarter 2026. The 2nm process chip will be a very important step for TSMC.

The company announced this week that it will begin trial production of 2nm process technology. According to related reports, Apple has already reserved its first production capacity for 2025. TSMC also plans to apply SoIC, which is a next-generation 3D advanced packaging platform, to M5 chips and begin mass production. SoIC production capacity is expected to expand several times by 2026.

Stock price movements immediately after settlement?
According to Market Chameleon, looking back on the past 12 quarterly financial results dates, the probability that TSMC will rise on the financial results announcement date is as high as 67%, the average stock price fluctuation rate is ± 4.6%, the maximum rate of increase is 9.8%, and the maximum decline rate is 5.5%.