Should Investors Buy Taiwan Semiconductor (TSM) Stock as Q1 Earnings Approach?

Responsible for 50% of the world’s semiconductor chip components, Wall Street will be paying close attention to Taiwan Semiconductor’s TSM Q1 results on Thursday, April 17.

While global trade war fears have riddled the tech sector, Taiwan Semiconductor has appeased the Trump administration by planning to invest $100 billion in semiconductor manufacturing plants in the U.S, which could help the company work its way around a 10% baseline import tax.  

The strategic move is critical as it will make TSM less vulnerable to production risks, with there being mounting concerns that China may eventually invade Taiwan. Furthermore, TSM serves major U.S. firms such as Nvidia NVDA, Apple AAPL, and AMD AMD.

Taiwan Semiconductor’s Q1 Expectations

Taiwan Semiconductor’s Q1 sales are expected to be up 33% to $25.2 billion compared to $18.87 billion in the prior-year quarter. Even better, Taiwan Semiconductor’s Q1 EPS is thought to have soared 46% to $2.02 versus $1.38 per share a year ago. Notably, Taiwan Semiconductor has exceeded the Zacks EPS Consensus for 17 consecutive quarters with an average earnings surprise of 7.55% in its last four quarterly reports.

Tracking Taiwan Semiconductor’s Outlook

Based on Zacks estimates, Taiwan Semiconductor’s total sales are expected to increase 26% this year to $113.51 billion from $90.08 billion in 2024. Plus, FY26 sales are projected to spike another 19% to $135.44 billion.

Taiwan Semiconductor is slated to post 29% EPS growth in FY25 with annual earnings projected to soar another 21% in FY26 to $11.02 per share. However, it’s noteworthy that FY25 and FY26 EPS estimates are slightly down over the last 60 days.

TSM Price Performance & Valuation

Year to date (YTD), Taiwan Semiconductor’s stock has fallen 20% which has underperformed the benchmark S&P 500’s 8% decline and the Nasdaq’s -13%. That said, TSM is still sitting on nearly +60% gains over the last three years, to impressively outperform the broader indexes.

Trading around $157, TSM shares are at a 17.1X forward earnings multiple which is beneath the benchmark’s 20.1X. What may also be catching investors’ attention is that TSM trades 50% below its decade-long high of 34.4X forward earnings and is at a slight discount to the median of 18.2X during this period.

Bottom Line

While it’s tempting to buy the YTD drop in Taiwan Semiconductor’s stock, TSM currently lands a Zacks Rank #3 (Hold). To that point, more upside will largely depend on Taiwan Semiconductor being able to reach or exceed Q1 expectations and most importantly, offering reassuring guidance or rhetoric that reconfirms its attractive growth trajectory.

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This article originally published on Zacks Investment Research (zacks.com).

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