Taiwan Semiconductor Manufacturing (TSM) & Sequans Communications (SQNS) Critical Analysis

Taiwan Semiconductor Manufacturing (NYSE: TSM) and Sequans Communications (NYSE:SQNS) are both computer and technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, risk, profitability and institutional ownership.

Volatility and Risk

Taiwan Semiconductor Manufacturing has a beta of 0.74, indicating that its stock price is 26% less volatile than the S&P 500. Comparatively, Sequans Communications has a beta of 2.58, indicating that its stock price is 158% more volatile than the S&P 500.

Institutional & Insider Ownership

19.4% of Taiwan Semiconductor Manufacturing shares are owned by institutional investors. Comparatively, 32.0% of Sequans Communications shares are owned by institutional investors. 1.1% of Taiwan Semiconductor Manufacturing shares are owned by company insiders. Comparatively, 9.4% of Sequans Communications shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Taiwan Semiconductor Manufacturing and Sequans Communications’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Taiwan Semiconductor Manufacturing 35.71% 24.84% 17.78%
Sequans Communications -42.44% -212.46% -32.62%

Dividends

Taiwan Semiconductor Manufacturing pays an annual dividend of $0.92 per share and has a dividend yield of 2.2%. Sequans Communications does not pay a dividend. Taiwan Semiconductor Manufacturing pays out 43.0% of its earnings in the form of a dividend. Sequans Communications has raised its dividend for 2 consecutive years.

Earnings and Valuation

This table compares Taiwan Semiconductor Manufacturing and Sequans Communications’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Taiwan Semiconductor Manufacturing $32.32 billion 6.76 $20.86 billion $2.14 19.70
Sequans Communications $52.06 million 3.05 -$11.89 million ($0.30) -6.63

Taiwan Semiconductor Manufacturing has higher revenue and earnings than Sequans Communications. Sequans Communications is trading at a lower price-to-earnings ratio than Taiwan Semiconductor Manufacturing, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current ratings and price targets for Taiwan Semiconductor Manufacturing and Sequans Communications, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Taiwan Semiconductor Manufacturing 0 5 2 0 2.29
Sequans Communications 0 0 6 0 3.00

Taiwan Semiconductor Manufacturing presently has a consensus price target of $27.00, suggesting a potential downside of 35.94%. Sequans Communications has a consensus price target of $3.96, suggesting a potential upside of 98.91%. Given Sequans Communications’ stronger consensus rating and higher possible upside, analysts plainly believe Sequans Communications is more favorable than Taiwan Semiconductor Manufacturing.

About Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing Company Limited (TSMC) is a semiconductor foundry. The Company is engaged in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. It operates through foundry segment. The foundry segment is engaged in manufacturing, selling, packaging, testing and computer-aided design of integrated circuits (IC) and other semiconductor devices and the manufacturing of masks. It operates three 12-inch wafer fabs, four eight-inch wafer fabs, one six-inch wafer fab (fab 2) and two backend fabs (advanced backend fab 1 and 2). It also manages two eight-inch fabs at its subsidiaries, WaferTech, LLC in the United States and TSMC China Company Limited. Its exploratory work focuses on transistors and technologies, such as three dimensional (3D) structures, strained-layer complementary metal-oxide semiconductor (CMOS), high-mobility materials and 3D IC devices.

About Sequans Communications

Sequans Communications S.A. is a fabless designer, developer and supplier of fourth Generation long term evolution (4G LTE) semiconductor solutions for wireless broadband applications, with a specific focus on the single-mode device market. Its semiconductor solutions integrate baseband processor and radio frequency (RF) transceiver integrated circuits (ICs) along with its signal processing techniques, algorithms and software stacks. In the broadband data device market, its solutions serve as the wireless communications platform in devices, such as smartphones; Universal Serial Bus (USB) dongles; portable routers; embedded wireless modems for laptops, tablets, and other consumer multimedia devices; and customer-premises equipment, such as fixed wireless access modems, routers and residential gateways. The Company’s products include SQN3330, SQN3223, SQN3221, SQN3241, VZ120Q, VZ22Q, VZ22M, US60L, SQN3220, SQN3240, SQN3120, SQN5120, SQN3140, VZ20Q, VZ20M, SQN1210 and SQN1220.

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