ASML Holding N.V. ASML is slated to report third-quarter 2024 results on Oct. 16.
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ASML expects revenues to be between €6.7 billion and €7.3 billion. The Zacks Consensus Estimate is pegged at $7.66 billion, indicating an increase of 5.4% from the year-ago quarter’s level.
The Zacks Consensus Estimate for earnings is pegged at $5.24 per share, up a penny from the year-ago quarter’s reported number. The estimate has been revised downward by 3 cents over the past seven days.
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ASML Holding has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 11.2%.
ASML Holding N.V. Price and EPS Surprise
ASML Holding N.V. price-eps-surprise | ASML Holding N.V. Quote
Earnings Whispers for ASML
Our proven model predicts an earnings beat for ASML this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($5.51 per share) and the Zacks Consensus Estimate ($5.24 per share), is +5.15%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: ASML carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors That Might Have Shaped ASML’s Quarterly Results
The semiconductor sector has been seeing a strong resurgence, driven by soaring demand and the increasing buzz around artificial intelligence (AI). This positive momentum has been a boon for companies like ASML, particularly in the wafer fabrication equipment space.
ASML is reaping the benefits of the growing adoption of advanced nodes, which play a key role in building the digital infrastructure for innovations like 5G, AI and high-performance computing. As technology nodes become smaller, demand for ASML’s cutting-edge products has only intensified.
Additionally, improvements in the use of lithography tools, both in logic and memory segments, have been a significant growth driver. The ongoing transition to newer memory technologies, such as DDR5 and high bandwidth memory (HBM), has likely boosted ASML’s third-quarter performance, with DRAM technology updates fueling memory demand.
ASML’s heavy investments in Extreme Ultraviolet (“EUV”) technology are also paying off. EUV lithography is critical for producing advanced chips, and the company’s service segment is benefiting from the rising demand for EUV-related services. In particular, the growing popularity of the NXE:3800 low numerical aperture (NA) machine, which can process 220 wafers per hour, has likely driven substantial EUV sales in the to-be-reported quarter.
However, the broader macroeconomic landscape presents challenges. Rising U.S.-China tensions, which have led to restrictions on the sale of advanced semiconductors and equipment to China, are expected to have been a notable headwind for ASML's quarterly performance.
ASML Stock Price Performance & Valuation
ASML Holding’s shares have appreciated 11% on a year-to-date basis, underperforming the Zacks Semiconductor Equipment - Wafer Fabrication industry’s 14.4% growth. The stock has also underperformed the S&P 500 Index’s rise of 21.9% and The Technology Select Sector SPDR Fund XLK ETF’s gain of 19.9%.
Comparing ASML with its peers, the stock has outperformed Lam Research’s LRCX 5.8% return but underperformed Applied Materials’ AMAT 26.5% gain year to date.
YTD Price Return Performance
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Now, let’s look at the value that ASML offers to its investors at the current levels. Currently, ASML is trading at a premium, with a forward 12-month P/E of 27.49X compared with the industry’s 24.05X, reflecting a stretched valuation.
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Investment Thesis for ASML Stock
ASML’s extensive product portfolio is closely aligned with its customers' strategic goals, allowing it to deliver cost-efficient solutions tailored to various applications. This alignment positions ASML well to capitalize on key global trends, such as the rapid adoption of artificial intelligence (AI), the energy transition and other megatrends reshaping the electronics industry. These developments are expected to drive substantial growth across the semiconductor market as the demand for advanced chips continues to soar.
Additionally, ASML is benefiting from a wave of new semiconductor fabs (factories) being built worldwide. The company has secured orders from many of these new facilities, and its management expects a stronger performance in the second half of 2024. It also anticipates a cyclical recovery by 2025. ASML's ongoing efforts to boost capacity and meet rising customer demand, with the backing of its supply-chain partners, are positive signals for long-term growth.
However, not everything is smooth sailing. ASML is facing challenges in the near term, such as market volatility, mounting U.S.-China tensions, increasing costs and slower momentum in the logic segment. The company is already projecting lower logic revenues for this year compared to the last, which adds uncertainty to its short-term outlook.
Final Thoughts: Hold ASML Stok for Now
A cautious approach may be suitable for those wondering how to play ASML stock ahead of the third-quarter 2024 earnings report. While the company’s long-term prospects seem bright as the semiconductor industry continues to regain momentum, investors should not rush in to buy the stock. Instead, they should closely monitor the stock’s developments for a more appropriate entry point, as an erroneous and hasty decision could affect portfolio gains.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
