Investors who have owned stocks in the last year have generally experienced some big gains. In fact, the SPDR S&P 500 ETF Trust total return over the last 12 months is 26.2 percent. But there is no question some big-name stocks performed better than others along the way.
Taiwan Semiconductor’s Bumpy Ride
One company that has been a disappointing investment in the past year has been chipmaker Taiwan Semiconductor Mfg. Co. Ltd.
A global semiconductor shortage has created a favorable pricing environment for Taiwan Semiconductor in the past couple of years. However, the company is also facing some potential headwinds that have weighed on the stock’s performance.
Taiwan reportedly accounts for about 65 percent of the world’s semiconductor manufacturing. Taiwan Semiconductor is in the process of building a new fab in Arizona, where it will manufacture 20,000 5-nanometer chips per month at full capacity. Unfortunately, that will only account for about 2 percent of the company’s full production and some investors are concerned about potential geopolitical issues in Southeast Asia. Tensions between the U.S. and China are high, and China has been exerting pressure on the region. If a full military dispute were to break out in Asia, Taiwan Semiconductor and its U.S. investors could be collateral damage. Meanwhile, U.S. federal subsidies incentivizing U.S. chip production will likely mostly benefit domestic producers, such as Intel Corporation and Texas Instruments Incorporated.
At the same time, as the chip shortage is alleviated in the coming quarters, semiconductor pricing will likely again soften, potentially eating into Taiwan Semiconductor’s margins, profits, and valuation.
Still, the company remains the world’s most advanced chipmaker heading into 2022, so optimistic investors are hoping the stock regains its momentum after a lackluster 2021.
At the beginning of 2020, Taiwan Semiconductor shares were trading at $59.60. By the beginning of March, the stock was down to $54.37 as news of the coronavirus spreading in China prompted concerns about a U.S. pandemic.
When the market crashed during the U.S. COVID-19 outbreak in March, Taiwan Semiconductor shares dropped as low as $42.70 during the height of the pandemic fears.
When the market bounced off pandemic lows, Taiwan Semiconductor began to rebound as well. By July, the company’s shares were above pre-pandemic highs and trading around $80.
Taiwan Semiconductor didn’t maintain the momentum of the broader market in the second half of 2020. After roughly two months of consolidation, the stock broke out to new highs in October, reaching $100 in November before finishing the year at around $110.
Taiwan Semiconductor in 2021, Beyond
Taiwan Semiconductor stock hit its 2021 highs of $142.20 in February before settling back into a trading range of between around $108 and $128 for most of the remainder of the year. Today, shares are hovering around $114.
Taiwan Semiconductor investors who bought one year ago and held on hoping for a big 2021 have generated a lackluster return on their investment at this point. In fact, $1,000 in Taiwan Semiconductor stock bought on Dec. 20, 2020, would be worth about $1,133 today, assuming reinvested dividends.
Looking Ahead
Analysts are expecting bullish momentum to return from Taiwan Semiconductor in the next 12 months. The average price target among the eight analysts covering the stock is $142.50, suggesting 24.5 percent upside from current levels.
By Wayne Duggan
© 2021 The Epoch Times. The Epoch Times does not provide investment advice. All rights reserved.
