Taiwan Semi Stock's (TSM) Selloff Is ‘Overdone,' Says BofA
Bank of America believes that the recent drop in chipmaker Taiwan Semiconductor (TSM) stock may be overdone and still sees value in the company. As a result, it reaffirmed its Buy rating. Four-star analyst Brad Lin noted that concerns over tariffs and some short-term issues in the AI supply chain are already reflected in the stock's valuation. He pointed out that TSMC now trades at 14x and 11.5x estimated 2025 and 2026 earnings, respectively, compared to the low of 10x seen during past geopolitical tensions like Nancy Pelosi's visit to Taiwan in 2022.
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Although Lin trimmed his price target on the stock from $265 to $240, he remains optimistic. For the first quarter, he expects revenue to decline by about 4% sequentially and gross margins to be around 57.3%, which is at the lower end of TSMC's guidance. The dip is partly due to production disruptions caused by recent earthquakes. However, Lin predicts that there will be a strong rebound in the second quarter, with revenue projected to grow by 5.7% as AI demand accelerates and shipments recover.
Looking ahead, Lin sees some uncertainty in the long term due to ongoing supply chain concerns and the impact of new tariffs. Therefore, investors will likely be watching for updates on TSMC's U.S. expansion plans, the strength of AI-related demand, developments in advanced chip packaging, and any news about a potential joint venture with Intel (INTC). Despite the challenges, Bank of America believes TSMC remains well-positioned in the semiconductor industry.
Is TSM a Buy, Sell, or Hold?
Overall, analysts have a Strong Buy consensus rating on TSM stock based on five Buys, one Hold, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average TSM price target of $245 per share implies 74.4% upside potential.
See more TSM analyst ratings
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