Tech Stock Under Pressure: Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM)

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Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) stock fell over 1.3% on 16th July, 2021 (As of 13:09:31 UTC-4 · USD ; Source: Google finance) after the company posted lower than expected results for the second quarter of FY 21.

The second quarter business was supported by continued strength in HPC and automotive-related demand. The gross margin contracted 2.4 percentage points sequentially to 50% mainly due to N5 dilution, the slower rate of cost improvement and the absence of positive inventory revaluation. Total operating expenses slightly increased TWD1.47 billion. Therefore, operating margins decreased 2.4 percentage points sequentially to 39.1%. The company has ended the second quarter with cash and marketable securities of TWD871 billion. The current liabilities decreased TWD14 billion mainly due to the decrease of TWD23 billion in accrued liabilities and others, which was partially offset by the increase of TWD6 billion in dividend payable.

TSM in the second quarter of FY 21 has reported the adjusted earnings per share of NT$5.18 ($0.19), missing the analysts’ estimates for the adjusted earnings per share of NT$5.24, according to analysts polled by Capital IQ. The company had reported the adjusted revenue growth of 35.9 percent to NT$372.15 billion in the second quarter of FY 21, beating the analysts’ estimates for revenue of NT$372.58 billion. 5-nanometer process technology contributed 18% of wafer revenue in the second quarter, while 7-nanometer accounted for 31%. Advanced technologies, which are defined as 7-nanometer and below, accounted for 49% of wafer revenue. Smartphone declined 3% quarter-over-quarter to account for 42% of the second quarter revenue. HPC rose 12% to account for 39%. IoT declined 2% to account for 8%. Automotive rose 12% to account for 4%. And DCE decreased 12% to account for 4%.

Additionally, during the second quarter, the company had generated about TWD187 billion in cash from operations, spent TWD167 billion in CapEx and distributed TWD65 billion for third quarter of 2020 cash dividend. Short-term loans grew TWD4 billion, while bonds payable increased by TWD137 billion. Overall, the cash balance had increased TWD83 billion to TWD748 billion at the end of the quarter. In U.S. dollar terms, the second quarter capital expenditures were of total USD 5.97 billion.

For the third quarter of 2021, the company expects revenue to range from $14.6 billion to $14.9 billion. The average Street estimate based on Yahoo Finance data was for revenue of $14.44 billion. Q3 gross margin is expected to be between 49.5% and 51.5% and operating margin between 38.5% and 40.5%.

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