Surely, it’s tempting for investors to place huge bets on Taiwan Semiconductor (NYSE:TSM). The company is a chipmaking giant with expectation-beating earnings results. Overeager traders should pay attention to TSM’s outlook for the global chip market. With that in mind, it’s not an ideal time to buy Taiwan Semiconductor stock.
It’s been an interesting year so far for Taiwan Semiconductor, to say the least. The company scored a subsidy from the U.S. government valued at $6.6 billion. On the other hand, a massive earthquake disrupted Taiwan Semiconductor’s supply chain.
Now, there’s a fresh set of quarterly results to look at – but also, an indirect warning from Taiwan Semiconductor. After considering the big picture, it makes sense for investors to wait as Taiwan Semiconductor stock will probably come down to a more favorable price point.
Taiwan Semiconductor’s Undeniably Positive Results
Don’t get the wrong idea. Investors don’t need to write off Taiwan Semiconductor completely. The company’s first-quarter 2024 results, published in Taiwan Semiconductor’s Form 20-F annual report for 2023, indicate that the company is on solid financial ground.
Here’s the rundown. In 2024’s first three months, when converted to U.S. dollars, Taiwan Semiconductor’s revenue grew 13% year over year to $18.87 billion.
In terms of New Taiwan dollars, Taiwan Semiconductor’s quarterly revenue totaled NT592.64 billion, beating the analysts’ consensus estimate of NT 582.94 billion.
Furthermore, Taiwan Semiconductor reported a quarterly net profit of 225.49 billion NT, which would translate to $6.97 billion in the U.S. This represents profit growth of 8.9% year over year, while also beating Wall Street’s consensus call for 213.59 billion NT.
Taiwan Semiconductor Revises Its Chip-Market Growth Outlook
Along with those positive results, Taiwan Semiconductor CEO C. C. Wei touted the “insatiable AI-related demand for energy efficient computing power” that Taiwan Semiconductor is glad to fulfill. However, don’t back up the truck and load up on Taiwan Semiconductor just yet.
Here’s an important detail that some hasty investors might have overlooked. Previously, Taiwan Semiconductor’s forecast for overall global chip-market growth (excluding memory chips) in 2024 was “more than 10%.” Now, the company’s outlook only calls for 10% growth.
This helps to explain why Taiwan Semiconductor stock fell despite the company’s Street-beating quarterly results. If any company would have its finger on the pulse of the global chip market, it’s Taiwan Semiconductor.
Thus, it’s startling to see Taiwan Semiconductor provide a current-year chip-market outlook that’s not particularly optimistic.
Taiwan Semiconductor Stock: Only Buy Below This Price
All in all, Taiwan Semiconductor is a chipmaking juggernaut that should grow and prosper in the long run. The company is resilient and will benefit from the “insatiable” demand for next-gen processors.
Hasty traders should take note of Taiwan Semiconductor’s revised outlook for the global chip industry. This just isn’t the right time for investors to go all in on Taiwan Semiconductor.
So, I’m sticking to my previously published strategy. In particular, I’m waiting for Taiwan Semiconductor stock to pull back to its early-February price of $115. I’d like to see the stock go below that price before jumping in. Then, to borrow an old Benjamin Graham/Warren Buffett concept, I can buy shares of a great company at a good price.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.