Global next-generation processor titan Taiwan Semiconductor (NYSE:TSM) is an underappreciated gem. Given the company’s sheer size and scope, you’d think TSM stock would be the go-to asset for chip-sector enthusiasts.
Is it possible that TSM stock is the final puzzle piece American investors have been missing? That is probably an exaggeration since the share price has recently exploded to the upside.
Nonetheless, we can easily find heated discussions about other microprocessor manufacturers in the mainstream press as well as on social media. Yet, at the same time, Taiwan Semiconductor is somehow typically treated as an afterthought.
The demand for processors isn’t likely to subside anytime soon. As much as any of its competitors, Taiwan Semiconductor has the ability to meet this demand. And after screening the data, you may find that TSM stock is worth owning even after a surge in the price.
TSM Stock at a Glance
Looking back through the history of TSM stock, we can discern price action similar to what we’ve seen in other microchip-market names. There were drawdowns in 2000 and in 2008-09. And as you might expect, the stock price declined during the onset of the novel coronavirus.
However, patient investors have been rewarded by sticking to their long TSM stock positions. For folks who held on, the price rout in March 2020 turned out to be little more than a blip on the radar. Hence, TSM’s 52-week range of $41.58 to $84 shows that the share price doubled within a short period of time.
And yet, even with a recent surge in the share price, TSM stock’s trailing 12-month price-earnings ratio is 25.7 times. That is not unreasonable amid a tech sector that has tolerated triple-digit P/E ratios for years on end.
Besides, TSM is an absolute dividend king in a sector that doesn’t always offer generous yields. In particular, its 2.1% dividend yield means that income-focused investors can appreciate their investment just as much as momentum-oriented traders can.
Heavy Market Demand
It would be a serious mistake to underestimate the global demand for microchips. If you can believe it, Fortune Business Insights reports that by the 2026, the global semiconductor market is forecast to reach $730.29 billion. That pace of growth would suggest a compound annual growth rate (CAGR) of 5.2% during that time frame.
As you might expect, the world’s prominent chipmakers are working furiously to meet that growing demand. You probably are familiar with some of the more well-known names in this niche.
But what you might not know is that one or more of the apparent leaders in this sector may not have the ability to manufacture microprocessor components quickly enough and in the large quantities that the market requires.
A Chipmaker Worth Watching
Amid the “processor race” in which manufacturers compete to produce microchips that are smaller and faster, Taiwan Semiconductor is proving its ability to deliver. Other companies might not be able to manufacture the latest 7-nanometer transistors fast enough.
Taiwan Semiconductor can make it happen, and the market has clearly recognized this. That’s one of the reasons why the TSM share price has achieved such strong momentum.
J.P. Morgan analyst Gokul Hariharan has recognized the company’s potential, as well. Hariharan recently reaffirmed his “overweight” rating on TSM stock. Moreover, the analyst increased his price target on the stock by 33%.
The Takeaway
Taiwan Semiconductor is a standout in an environment of intense demand for the latest and greatest microprocessor components. The data indicates consistent future growth in this market.
Well-known competitors might not be able to scale up their operations sufficiently to meet the market’s demands. Therefore, don’t let the opportunity in this hidden giant, TSM stock, pass you by.
On the date of publication, Louis Navellier had a long position in TSM. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
