A strong earthquake in Taiwan earlier this month forced Taiwan Semiconductor Mfg. Co. Ltd.
Although the company may be impacted by short-term production delays and wafer losses that could hurt its June-quarter sales, most of these lost sales may be recovered in the third quarter, according to Needham.
The Taiwan Semiconductor Analyst: Charles Shi reiterated a Buy rating for Taiwan Semiconductor, while raising the price target from $133 to $168.
The Taiwan Semiconductor Thesis: Despite the near-term setbacks to sales, the company is likely to meet its full-year growth targets, Shi said in the note.
Taiwan Semiconductor has reaffirmed its full-year revenue growth target, "while still in the process of assessing the full extent of the earthquake's impact," the analyst stated. He added, however, that some wafers are likely to have been scrapped and the company may need to produce them again, delaying the delivery to customers.
Delayed shipment does not indicate any demand destruction and the lost production may be fully made up in the back half of the year, setting the stage "for a very strong 3Q," Shi wrote.
"We believe TSMC is one of the best AI pick-and-shovel stories," he added. A pick-and-shovel play is an investment strategy that involves going long on stocks of companies that produce tools or services for another industry.
TSM Price Action: Shares of Taiwan Semiconductor had risen by 1.68% to $147.84 at the time of publication on Wednesday.
