Mike O. schreef op 20 september 2024 12:35:
ASML Was a Chip-Sector Darling. Why This Analyst Has Soured on the Stock.
By
Adam Clark
Last Updated: Sept. 4, 2024 at 10:12?a.m. ET
First Published: Sept. 4, 2024 at 8:29?a.m. ET
ASML’s monopoly on making the machines needed to produce advanced chips has made it a popular investor play. However, one analyst has cooled on the stock.
ASML supplies the lithography machines that are essential for manufacturing semiconductors. The Dutch company’s dominant position in the chip-manufacturing supply chain has sent its American depositary receipts up 27% over the past 12 months.
Yet the picture has darkened recently. The stock dropped after ASML’s latest earnings report in July, seemingly in reaction to worries about stricter U.S. restrictions on exports of chipmaking equipment to China. ASML’s ADRs are down 19% in the past three months.
Wall Street has generally seen the fall as a buying opportunity, but now the stock is losing a bull in UBS analyst Francois-Xavier Bouvignies. He reduced his price target on ASML’s Amsterdam-listed stock to €900 ($994) from €1,050 previously and lowered his rating to Neutral from Buy.
ASML’s Amsterdam-listed stock was down 5.5% to €739.70 on Wednesday. Its ADRs were down 3.7%.
rt-term upside potential from the solid 2025E outlook (implying strong Q3 24 orders), we think the narrative will begin to shift to 2026/27, where we see c5-10% downside to [earnings] consensus,” wrote Bouvignies in a research note.
Concerns over China are part of the reason for the downgrade. The Dutch government plans to curb ASML’s ability to repair and maintain the semiconductor-making machinery it supplies to chip makers in China, Bloomberg reported recently, citing people familiar with the matter.
While ASML is already restricted from selling its most advanced machines to Chinese customers, it still generated 49% of its revenue from China in the second quarter, as buyers looked to stock up on older machinery.
Bouvignies expects Chinese spending on chip making equipment to drop. He forecast a 24% fall in revenue from the country in 2025 and a further 11% drop from that level in 2026.
At the same time, he also sees non-Chinese customers potentially slowing their spending on ASML’s lithography tools in the coming years. In particular, Bouvignies noted that expected architecture changes in logic and memory chips over the next couple of years likely won’t demand higher spending on lithography tools from important customers such as Samsung Electronics and SK Hynix
Stockholders might hope that growing demand for artificial-intelligence chips to be made by the likes of Taiwan Semiconductor Manufacturing, an ASML client, would more than offset that drag.
But Bouvignies estimates that AI-related revenue will peak at 16% of ASML’s total revenue in 2025 due to the relatively small number of individual AI server chips produced, compared with other areas such as smartphone processors. On the positive side, he noted that if AI-enabled smartphones from the likes of Apple lead to increased sales, that could turn out to be too pessimistic.
All in all, Bouvignies expects ASML’s earnings per share growth to drop to midteens percentages starting in 2026. That compares with the average compound annual growth rate of 23% over the past 10 years.
“We believe investors will likely be less willing to pay the premium multiple that ASML has commanded over the past few years and see this as the correct time to take a pause,” Bouvignies wrote.
www.marketwatch.com/articles/asml-sto...