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How Taiwan Semiconductor Shares Jumped 12.9% Thursday Morning

By Anders Bylund - Jan 14, 2021 at 2:11PM

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The chip foundry reported modest sales but strong earnings, and promised to focus on orders from the automotive industry in the months ahead.

What happened

Shares of Taiwan Semiconductor Manufacturing ( TSM -1.95% ) rose by as much as 12.9% in Thursday morning's session. The chip manufacturer, a global leader among the third-party companies that turn processor designs into physical products, delivered a mixed earnings report alongside bullish guidance for the next quarter. As of 2:08 p.m. EST, the stock was still up by 9.2%.

So what

Taiwan Semiconductor's fourth-quarter revenue increased 14% year over year to $12.7 billion. Earnings per share rose from $0.73 to $0.97. Your average analyst was expecting earnings near $0.94 per share on sales in the neighborhood of $12.9 billion.

Looking ahead, TSMC's first-quarter guidance was for revenues of roughly $12.9 billion. The current Wall Street consensus forecast is for revenues to come in at $12.6 billion.

A silicon wafer in the process of being turned into dozens of microchips.

Image source: Getty Images.

Now what

The chipmaker saw strong orders for high-margin chips that go into such tech as 5G smartphones and high-performance computing systems of the enterprise-class variety. The richer product mix explains how TSMC generated a positive bottom-line surprise despite its slight miss on the revenue line. These trends should continue in the next reporting period.

The automotive computing sector is also staging a comeback in early 2021, and management promised to prioritize automotive chip orders in the near term, supporting the industry's recovery process.

"In TSMC, this is our top priority and we are working closely with our automotive customer to resolve the capacity support issue," CEO C.C. Wei said on the earnings call.

Investors were quick to embrace TSMC's solid results and promising outlook. The stock set a new all-time high Thursday, having gained 98% over the last 52 weeks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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