Intriguing Semiconductor Stock to Watch Amid Sector Slump

TSM hit a two-year low ahead of this week's earnings report

Deputy Editor
Oct 10, 2022 at 2:20 PM
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Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) is down 3.3% at $67.41, earlier hitting a two-year low of $67.01, as the stock succumbs to today's sector slump. The Biden administration published a new set of export control measures, including one that will cut China off from certain semiconductor chips made anywhere globally with U.S. equipment.

Despite the recent weakness in chip stocks, Wedbush reiterated its "outperform" rating on TSM, citing the company's strong relationship with Apple (AAPL) as well as weakness in the Taiwan dollar against the U.S. dollar. The firm also threw in a 25% price-target cut, however.

Earnings are coming up for the company as well, with its third-quarter report due out on Thursday, Oct. 13. TSM has a mixed post-earning history, with four of its last eight next-day sessions finishing positive and four negative. This time around, the options pits are pricing in a 7.9% post-earnings swing, regardless of direction, which is higher than the 3.5% move the stock averaged over the last two years. 

Long-term, overhead pressure at the 100-day moving average is helping guide the stock lower, rejecting its attempt at a mid-August rally. More recently, the 20-day moving average has kept a tight lid on the shares as well. Year-to-date, the equity is down 44.9%. 

TSM Oct10

Puts are much more popular than usual in the options pits. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TSM's 50-day put/call volume ratio of 2.20 ranks higher than 97% of readings from the past year. Today, however, calls are running at double what's typically seen straight out of the gate. 

 

 

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