Apple Supplier TSMC Is 'Attractive' Analyst Says. What Results May Mean For iPhone Maker

Taiwan Semiconductor Manufacturing Company Ltd (NYSE: TSM) reported third-quarter revenue growth of 35.9% year-on-year to $20.23 billion, beating the consensus of $19.91 billion. EPS of $1.79 per ADR beat the consensus of $1.70.

Needham analyst Charles Shi maintained a Buy on TSMC and a $110 price target. TSMC's 3Q22 results and 4Q22 guidance were largely in-line with his respective estimates. 

Management expects TSMC to buck the downturn and grow into 2023. 

Yet, Shi thinks the newly announced reduction of 2022's CapEx from $40 billion to $36 billion, half of which is caused by "capacity optimization" of the N7 node, suggests that the company is expecting weaker demand for N7 than he had modeled. 

While the company's bullish comments on N5 and N3 are encouraging, he cut his 2023 sales growth estimate by 3pts to reflect the likely extended weakness of N7. 

Yet, Shi believes the market is not pricing TSMC's 2023 as an up year but a down year; this makes the stock very attractive at its current all-time-low multiple. 

Apple Inc AAPL will likely be the first company to use an updated version of TSMC's latest chipmaking technology in 2023 while also planning to adopt it for some of its iPhones and Mac computers.

TSMC will use its N3E chipmaking technology to commercialize the A17 mobile processor for premium entry in the iPhone line-up set for the 2023 release.

N3E is an upgraded version of TSMC's present 3-nm production tech likely to cater to the next generation of Apple's M3 chip for its Mac offerings

Price Action: TSM shares traded higher by 4.20% at $66.81 on the last check Thursday.