Goldman Sachs Downgrades Taiwan Semiconductor (TSM) to Neutral; Cyclical Headwinds

May 31, 2012 10:23 AM EDT
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Price: $30.07 +1.48%

Rating Summary:
    7 Buy, 8 Hold, 0 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Goldman Sachs downgraded Taiwan Semiconductor (NYSE: TSM) from Buy to Neutral, price target lowered from $16 to $13.50.

Analyst, Donald Lu, said, "After the strong wafer shipment growth in 2Q12 and 3Q12, we believe foundry demand would start to decline in 4Q12 due to weakening end-demand in Europe and China and rising supply chain inventory. TSMC shares typically tend to outperform the market during cyclical corrections, but we expect the degree of outperformance to gradually diminish during the cyclical recovery, and historically, its shares have rarely outperformed the market once its utilization rate has surpassed 95%. We estimate TSMC’s utilization rate to reach 98% in 2Q12 driven by cyclical recovery. Thus, we downgrade the stock on limited upside for outperformance in terms of utilization."

"We cut our 2012E/2013E/2014E EPS by 6%/6%/3% to reflect our expectations of weakening demand and inventory correction."

For an analyst ratings summary and ratings history on Taiwan Semiconductor click here. For more ratings news on Taiwan Semiconductor click here.

Shares of Taiwan Semiconductor closed at $13.93 yesterday.

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