Taiwan Semi meeting resistance
The chipmaker is seeing continued momentum, but the stock faces huge resistance at $12.
Taiwan Semiconductor Manufacturing (TSM), the largest chipmaker for Apple (AAPL), Intel (INTC) and other companies, reported first-quarter earnings Tuesday that were 10.1% above Wall Street's expectations. Earnings of $1.07 billion were the highest since the fourth quarter of 2007.
The company said it expects momentum to continue in the second quarter, with sales forecast to rise 8.7% to 10.9% from the level of the first quarter. That would push revenue to a company record for a quarter. Gross margin will climb to 48% to 50% in the second quarter from 47.9% in the first quarter, the company projects.
Ordinarily, that kind of upside guidance would lead me to increase my target price for a stock. But while as a company Taiwan Semiconductor may be cooking, Taiwan Semiconductor the stock (or actually ADR, American Depositary Receipt) has a problem that makes me reluctant to raise my target price above the $12.50 a share that I set on Jan. 29.
Look at a long-term chart of the Taiwan Semiconductor ADR and the problem just about reaches out to grab you by the throat. The last time this ADR was above $12.50 was way back in March 2002, when it hit $14.
From October 2000, the year of the technology stock crash, to April 2010, the stock has traded in a range below $12.50. That's created huge resistance at $12 or so that the stock needs to overcome to move significantly higher.
That resistance is made up of all the people who bought at prices up to $12 or so and who would be more than willing to sell out at that price to break even or show a slight profit.
Getting through this kind of multiyear price ceiling can take years. And I'm reluctant to make that kind of time commitment for Jubak's Picks for any technology stock; the sector is just too volatile. (And although I don't want to buy them until we've seen some kind of correction in the current rally, I think there are better industrial technology bets if your time frame is longer than six months. For three ideas, see this post.)
So, I'm leaving my target price at $12.50 by May 2010. That's still roughly 17% above the stock's price on April 27.
At the time of this writing, Jim Jubak owned shares of Taiwan Semiconductor in his personal portfolio.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Firearms sales surged in 2013, but there are signs that demand is starting to wane.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.