Taiwan Semiconductor (NYSE:TSM) shares rose in premarket trading on Monday, as Morgan Stanley upgraded the company, citing several factors, including bigger opportunities from Apple (NASDAQ:AAPL)
, Intel (NASDAQ:INTC)
and Sony (NYSE:SONY). A team of analysts, led by Charlie Chan, raised their rating to overweight and put a NT780 ($28) price target on the stock, noting that Taiwan Semi is "repricing the value-add of foundry services," adding that it recently had a breakthrough with its enhanced 3 nanometer process and is moving down to 2 nanometer. In addition, the analysts noted Taiwan has a "bigger outsourcing opportunity from Apple, Intel, and Sony than we previously expected" and lastly, its capital expenditure spending could be "significantly reduced in 2024." Taiwan Semiconductor shares were up slightly more than 1% to $122.54 in premarket trading on Monday. While there are several positive opportunities for Taiwan Semi ahead, the key risk is a "tech supply chain rebalancing," Morgan Stanley noted, with an inventory correction in smartphones, TVs and consumer PCs having likely already started. The investment firm noted that Taiwan Semi is investing significant amounts of capital ($140 billion between 2019 and 2023) to extend its lead over rivals, such as Samsung (OTC:SSNLF), with the tech gamp having widened over the past year. "We expect Taiwan semi to have nearly 100% market share in 3nm in 2023," the firm wrote in a note. "Moreover, given cost-savings at the N2 GAA node, TSM's capex intensity should moderate to 35% in 2024, boosting free cash flow and dividend payout. 20% revenue CAGR, driven by further share gains: Our latest industry checks suggest that Intel's CPU outsourcing may exceed 20% in 2024." The firm continued: "In addition, news of more Apple-designed chips (e.g., modems) and Sony's image sensor outsourcing was not previously in our model. We expect these and other gains to help TSM reach [$100 billion] revenue in 2024, implying a 20% CAGR from 2021." Taiwan Semi is one of the major holdings of the VanEck Vectors Semiconductor ETF (NASDAQ:SMH)
, which continues to be a favorite among investors in the early going of 2022.
TSM AAPL INTC SONY