JPMorgan issued a research report, in which it raised its EPS estimates for TSMC (TSM.US) by 3%, 9% and 8% for FY24, FY25 and FY26 respectively, reflecting expanded gross margins due to N3 (3nm process), N5 (5nm process) and CoWoS price hikes, as well as stronger revenue growth due to accelerating demand for AI in data centres. The broker also raised TSMC's AI revenue forecast, which it now expects to reach 35% of total revenue by 2028.
With price hikes in 2025, higher utilization of the N7 (7nm process) and improved margins on the N3, the broker forecasts TSMC's gross margins to reach a high level of 50% to 60% in 2H25-1H26, which would drive EPS to NT$64 in FY26.
JPM raised its target price from NT$900 to NT$1,080 and maintained its Overweight rating.
JPM expected TSMC's revenues for 2Q24 to beat the median guidance by about 4-6% on strong demand for artificial intelligence and Apple (AAPL.US) . The broker predicted TSMC to guide for 3Q24 USD-denominated revenue growth of 13-17% QoQ and flat gross margins QoQ, suggesting that the company has the opportunity to raise its 2024 revenue guidance and potentially raise capital expenditures to the upper end of its guidance range.
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