ASML stock ignites course fireworks

Last Updated: 26. Januar 2024By

ASML stock recently saw a significant rise, climbing up by around a quarter in the last few days. The Dutch chip giant, Europe’s most valuable technology company, is currently overwhelmed with orders. The demand in China, in particular, has significantly boosted the company’s business in the last quarter. This indicates that the bottom of the semiconductor market may have been reached.

ASML is the second-largest manufacturer of semiconductor equipment in the world. With a market value of around 320 billion euros, the chip specialist is one of Europe’s top tech heavyweights.

The semiconductor market is structurally strong and makes our digital lives possible with complex chips that make our devices intelligent. For TSMC, Samsung, and Intel, ASML is the most important supplier. Only with ASML equipment can the world’s most advanced microchips be produced. The company, with its 42,000 employees, is a global leader in some processes that are crucial for semiconductor production.

ASML has established a strong market position with its advanced equipment for semiconductor production (known as lithography equipment). These are needed to manufacture chips that are only a few nanometers in size.

Production facilities, as well as research and development facilities, are located in the United States, Taiwan, Korea, China, and the Netherlands. The company is present in more than 60 locations in 16 countries worldwide.

ASML firing on all cylinders The Dutch company’s business has been running at full speed recently: The company increased its revenue in the final quarter by 12.5% to 7.23 billion euros. At the same time, operating income improved by 12.6% to 2.39 billion euros. As a result, the operating profit margin was just above the previous year’s level at 33.1% (Q4 2022: 33%).

The tech giant’s net profit was 2.04 billion euros, or 5.20 euros per share. By comparison, the company reported a profit of 4.60 euros per share in the same quarter of the previous year.

The full-year figures were also impressive, primarily due to the challenging industry environment: With a revenue increase of around 30%, net income was increased by almost 40% to over 7.8 billion euros. Shareholders will receive a dividend of 6.10 euros per share, which is about 5% more than the previous year.

Order intake goes through the roof Investors were particularly pleased with the development of order intake. After all, ASML was able to increase orders by 253% to 9.2 billion euros compared to the previous quarter, reaching a new record level.

According to CFO Roger Dassen, the tech company now has orders worth 39 billion euros in its books. This corresponds to about one and a half times the revenue from last year.

2024 forecast remains cautious Based on this, it seems highly likely that the temporary weakness in the semiconductor market is coming to an end. However, ASML remains cautious in its forecast and only expects revenues at the previous year’s level for 2024. The stock’s strong surge is likely due to the outlook for 2025, when annual revenue is expected to reach up to 40 billion euros (vs. 2023: 27.6 billion euros). In addition, the company’s management anticipates significantly improved profitability.

According to the financial portal, analysts expect earnings to increase from 19.10 euros (2024) to 27.53 euros (2025) per share. After the stock’s rally, the stock is trading at 29 times the expected earnings for 2025.