Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) — This is the world’s largest dedicated semiconductor foundry.
S&P Capital IQ expects that the company’s advanced technology should allow it to benefit from increased demand for next-generation smartphones and maintain its leading position in the high-end foundry market.
Its analysts forecast revenue will increase 18% this year and 10% in 2016. Operating earnings are estimated to jump 11% to $1.87 per share in 2015 and another 10% to $2.06 per share in 2016. Finally, they expect profit margins in the mid-60% area thanks to the company’s advanced manufacturing technologies.
However, I believe Capital IQ’s price target of $27 is much too conservative for this well-run, seasoned technology giant that also provides a dividend yield of more than 2%.
In late April, TSM stock broke to new highs on speculation that Taiwan and China would establish a stock trading link like that of China and Hong Kong. Lacking confirmation of this, shares have pulled back from their recent high of $25.77.
TSM stock is trading in a well-defined bull channel with immediate support at its 50-day moving average at $24. Volume has been much higher on up days than down days, signifying strong accumulation by major buyers.
Of more immediate interest is the cross of the 50-day moving average by the 20-day moving average — a trading buy signal.
Buy TSM stock on a pullback to $24 for a trade to $28, which would result in a 17% profit. This is also a strong candidate for those seeking a solid, long-term technology investment, as the company has proven it can successfully withstand competition from small and large competitors.
