TSMC Financial Report Preview: Earnings Surge! But Guidance Estimated to be Mediocre?

Investment Insights - Taiwan Semiconductor's Q4 profit is expected to rise over 50%, but the guidance for Q1 2025 is estimated to be conservative. On January 16, Taiwan Semiconductor (TSM) will announce its financial report for the fourth quarter of 2024. The market generally expects Taiwan Semiconductor's quarterly revenue to be $26.25 billion, a year-on-year increase of 33%. Earnings per share are expected to be $2.20, a year-on-year increase of 51%. 【Source: TradingView; Taiwan Semiconductor's revenue and profit】 Taiwan Semiconductor will update its outlook for the current quarter and the entire year during the earnings call, including capital expenditure plans. Industry analyst Charles Shum estimates that Taiwan Semiconductor's gross margin may rise to its highest level in two years at 58% or even higher. Analysts point out that there are four key points for investors to pay attention to in the upcoming earnings call. First, the revenue expectations and the capacity expansion expectations for high-end wafers. This can help investors understand the demand for AI chips in the next year to year and a half. Second, the capacity ramp-up situation at the Arizona factory in the United States. This is an important variable for the localization of Apple and NVIDIA chips. Third, whether there is a profit margin compression situation for chips below 7 nanometers, which can provide insights into the competition for low-end chips. Finally, the company's capital expenditure plans for 2025, which can indicate the company's confidence in the acceptance of 2 nanometers. Morgan Stanley predicts that due to seasonal effects from the iPhone, Taiwan Semiconductor's revenue may decline by 5% in the first quarter. Nevertheless, the company expects revenue for the entire year to still grow, but the growth rate may be below 20%. Analyst Charlie Chan stated that Taiwan Semiconductor typically adopts a conservative performance guidance and then exceeds expectations, and this time is expected to be no different. What is the outlook for Taiwan Semiconductor's stock price? Citigroup analysts indicate that driven by NVIDIA, Taiwan Semiconductor's AI-related revenue is expected to grow significantly in 2025, with NVIDIA potentially surpassing Apple to become Taiwan Semiconductor's largest customer, contributing to a doubling of revenue to 20% Bank of America Securities maintains a buy rating on Taiwan Semiconductor, giving a target price of $250, which implies that Taiwan Semiconductor's stock price can still rise by 20%. Barclays Bank has set a target price of $240 for Taiwan Semiconductor