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9 brokerages still rate TSMC shares 'buy' despite weak Q2 outlook

2018/04/21 16:28:34

Taipei, April 21 (CNA) Nine foreign brokerages out of the 11 that follow Taiwan Semiconductor Manufacturing Co. (TSMC) have stuck to "buy" recommendations on TSMC shares, even though the world's largest contract chipmaker gave lower-than-expected sales guidance for the second quarter of this year.

Among the nine brokerages, one U.S.-based securities house said it has maintained a buy rating on TSMC and left a target price of NT$290 (US$9.86) on the stock amid optimism toward the chipmaker's development of its advanced 7 nanometer process. The target price is the highest among the 11 brokerages.

The nine brokerages are part of 11 foreign securities houses that published research notes after TSMC held an investor conference Thursday to detail its first-quarter results and give the second-quarter sales forecast. The remaining two have maintained a "neutral" rating on TMSC shares.

In the investor conference, TSMC's senior vice president and chief financial officer Lora Ho (何麗梅) said the company sales for the April-June period could be affected by continued weakness of the global smartphone market to range between US$7.8 billion and US$7.9 billion, down 7 percent-8 percent from a quarter earlier.

The forecast came short of an earlier market expectation that said TSMC's second-quarter sales would stay little changed from the first quarter.

The weaker-than-expected second-quarter sales guidance plunged TSMC shares by 6.34 percent to close at NT$229.00 on the Taiwan Stock Exchange Friday, and as the most heavily weighted stock in the local market, TSMC led the local main board to move lower by 1.75 percent.

After Friday's heavy losses, TSMC's market capitalization fell by NT$401.9 billion to NT$5.93 trillion after foreign institutional investors sold a net 70.84 million shares, the largest net sell among all of the listed firms in the Taiwan equity market.

The U.S. brokerage said revenue generated by TSMC's 7nm process production, which started earlier this year, is expected to rise more than 10 percent in 2017 and 2018. TSMC said in its Thursday investor conference that the 7nm process is expected to account for 20 percent of the chipmaker's sales in the fourth quarter of the year and 10 percent for the whole of 2018.

CNA cannot identify the brokerage, because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price forecasts for specific stocks.

Another U.S. brokerage said that although TSMC has felt the pinch from the slower-than-expected demand for the signature iPhone X, the chipmaker is expected to benefit from solid demand for high-performance computing devices and the planned launch of the next generation of the iPhone in the second half of this year.

The U.S. brokerage has left a "buy" recommendation and a target price of NT$285 unchanged.

A Japanese brokerage has cut its target on TSMC shares to NT$270 from NT$275, reflecting a slower second quarter, but has maintained an "overweight" rating on the stock as the chipmaker is expected to benefit from the fast-growing artificial intelligence development.

Meanwhile, a European brokerage has maintained a "buy" rating and a NT$275 target price for TSMC, while another European firm said it has cut its target price to NT$264 from NT$266.00 but left a "buy" recommendation unchanged.

(By Jeffrey Wu and Frances Huang)