With the news that Warren Buffet has introduced a notable position into the company I put it on my watchlist for further evaluation. The stock, along with most of the technology sector, has been pummeled in the past year. This has forced the asset from its high of $145 to today’s price of $86.80, as of this writing.
I think most would agree, the technology sector is still a mess. AMD, INTC, and even AAPL have all traded considerably lower from their inflated valuations of 2021. That said, should we be looking to enter a position into this tech giant or is more downside ahead?
Investment Analysis
Looking at the data above we can quickly identify a few things under the Analysis section. First the positives;
- Sales growth is great
- Price/book is good
- Technical analysis is good
- Price is below Finviz.com target price
- PEG ratio is great
- Assets/equity is good
- Interest Coverage is good
- Debt/equity is good
- Price is below my acceptable buy price
Now, let’s consider the potential reasons to avoid Taiwan Semiconductor (TSM) at this time;
- Lower dividend than other potential investments
- Price is above Book value per share
- Price/sales is weak
- Price/FCF is too high
- Debt/FCF is too high
- Disrespectful Shareholder yield
- Payout ratio much to high (may be an error)
- Overall sector is weak
Considering the pros and cons above, it could make sense to keep a close eye on this one for a price dip below today’s value. Should that happen, it looks like Taiwan Semiconductor is poised to march back up to its previous high or beyond.
That said, I don’t like the greedy nature of this company but honestly that’s true of most technology companies. They utilize most of their retained earnings to continue growing and developing new processes for the company. So, I guess I can’t be too upset. Additionally, I’m not in love with the debt profile and should hard times continue for another year they may be in for some trouble. However, they do have a good interest coverage ratio so, at least as of today, they’re capable of maintaining that debt to avoid much harm.
Price Chart
As noted previously, Taiwan Semiconductor has been in a relentless downtrend all of 2022 but we can see from the chart above that the bottom may have been set back in November of 2022. Should that indeed be the low of the year there could be a massive amount of upside potential just waiting on this asset.
However, you may also notice a few things, RSI is predicting a slow down or a reversal of the recent bullish trend, the TTM squeeze indicator is screaming divergence, and price has recently breached the standard deviation channel. Should these three indicators hold any value, the the prediction is to wait for price to come back in line.
That said, with the world’s most notable investor having taken a stake in the company, relative volume is sure to increase as more people follow his lead.
Investment Decision
Considering the information above, taking a position into Taiwan Semiconductor (TSM) stock could make sense. That said, there are some particularly challenging hurdles from both a fundamental and a technical perspective standing in the way.
For now, I’m going to begin Dollar Cost Averaging into a position with hope price will continue lower in the near term and offer an even more attractive entry price. Should price continue higher, at least then I’ll have a few shares to offset the increasingly higher cost.
Finally, for a more “professional” analysis of the state of Taiwan Semiconductor’s future, here’s a breakdown from StockAnalysis.com regarding TSM.
What do you think? Is Taiwan Semiconductor a buy today, or will the tech sector continue its ugly decline? Let me know in the comments below.
God bless,
Jeff
*This post is NOT a recommendation to buy, sell, or trade any security. The information provided within is strictly for entertainment. Traders or investors should always consult a registered financial professional prior to trading or investing.
