Earnings Preview for Taiwan Semiconductor—AI Demand Remains Strong
Earnings Preview for Taiwan Semiconductor—AI Demand Remains Strong
By:Mike Butler
The company reports earnings on Thursday, following December year-over-year revenue growth of 57.8%
- Taiwan Semiconductor Manufacturing is set to report quarterly earnings on Jan. 16 at 1 a.m. CST.
- Preliminary revenue figures released on Friday show strong growth.
- Demand for AI computing is increasing, and TSM stock is one of the beneficiaries.
- TSM is expected to report earnings-per-share (EPS) of $0.43 on $25.83 billion in revenue (TWD adjusted).
- TSM has exceeded EPS and revenue estimates four quarters in a row.
Taiwan Semiconductor Manufacturing (TSM) is set to report quarterly earnings in the early morning hours of Jan. 16 before the market opens.
On Friday, Jan. 10, the company released its monthly revenue report ahead of the earnings call: “On a consolidated basis, revenue for December 2024 was approximately NT$278.16 billion, an increase of 0.8% from November 2024 and an increase of 57.8% from December 2023. Revenue for January through December 2024 totaled NT$2,894.31 billion, an increase of 33.9% compared to the same period in 2023."
Strong revenue figures could hint at a strong earnings call in a few days, and the stock market has looked favorably upon TSM stock over the last six months:
After reaching a low of $133.57 during the Japanese yen carry trade unwind, TSM stock has rallied to a new stock price of around $200 after reaching a new all-time high of $222.20 on Jan. 6.
On Jan. 7, we saw a big sell-off in the AI sector after an announcement of a new AI diffusion regulation that would regulate chip exports from the U.S. markets. This sent products like NVIDIA (NVDA) and TSM tumbling during market hours. TSM has a large presence in Phoenix and bold plans to invest big money over the next five years—$65 billion by 2030.
AI-related stocks made a lot of news this week zer56, but taking a look at the implied volatility of TSM can help us put context around the earnings announcement on Thursday.
For this week, TSM stock has a +/- $11.89 expected move based on current implied volatility. This is a relatively small move when weighed against the notional value of the stock price, which hovers around $200.
Typically, we see earnings announcements fall between 5%-10% of the stock price for the week, and TSM in AI% feels pretty low compared to a product like Nvidia (NVDA) which usually has a much higher expected move.
Looking to the March cycle, we can see an expected +/- $25.75 stock price move. While the weekly expected move is low, it still makes up for a large chunk of the stock's expected range for the next few months.
Bullish on TSM stock for earnings
If you're bullish on TSM for earnings, you're looking for continued success relative to benchmark expectations. Strong revenue reported on Friday certainly doesn't hurt, but high expectations can create a lot of pressure for a company to "do no wrong" in its earnings call. Either way, the market likely expects a really strong earnings report after the revenue release on Friday. And if we're to expect TSM stock to go higher on Friday, then on Thursday morning we should expect a stellar earnings call with a strong 2025 forecast.
Bearish on TSM stock for earnings
If you're bearish on TSM stock for earnings, you're looking for an earnings per share (EPS) or revenue miss. If there is more context around the AI diffusion rule and how this might hinder TSM's performance, it could send the stock lower on Friday. Any sort of hiccup or softening of expectations in such a booming market is typically seen as a big no-no for tech stocks, so it'll be interesting to see what TSM executives have to say Thursday morning.
Tune in to Options Trading Concepts Live on Wednesday at 11 a.m. CST for a look at the TSM options market for an earnings trade before the announcement is made!
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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