The Trading Desk - TSMC's Q2 Earnings: Analysts Forecast Profit Boost

Earning Preview
Taiwan Semiconductor Manufacturing Company (TSMC) is expected to report a 30% increase in second-quarter profit on Thursday due to strong industry demand. Analysts expect  net profit of T$235.2 billion on revenue of T$658.1 billion for the quarter ending June 30 according to Bloomberg estimates. That compares to the 2023 second-quarter net profit of T$181.8 billion.

This estimate is increasingly seen as overly cautious, especially after TSMC's reported that sales in the second quarter jumped 40% year-on-year to NT$673.5 billion compared to the average forecast of a 36% rise expected last Wednesday. This has significantly shaped the market's expectations for its upcoming earnings this Thursday.

Price Action
TSMC's stock has surged 82% year-to-date, and its ADR exceeded a trillion-dollar market cap last week following the announcement of its Q2 revenue beat. Currently, there is substantial open interest and volume in the 1-month TSMC call options at the 185 and 190 strike price levels.

Trade Inspiration
Earnings exceed expectations – TSMC and semiconductor sector stocks might rally. At Saxo, we have a theme basket of semiconductor stock and ETFs that might benefit from this positive momentum. You can find them here. Alternatively, you can consider looking at an update by our technical strategist on the recent price action of TSMC (2:00 mark).

Earnings miss expectations – If TSMC's earnings are worse than expected, semiconductor stocks might face some short term headwinds. To earn some income, you can consider selling covered call options on semiconductor stocks you already own. One way to protect against losses is to buy protective put options, which give you the right to sell your stocks at a certain price later. Some investors might wish to diversify into other sectors as concentration in technology names build up. You can find out how to diversify into other sectors with this article.