ASML Stock Analysis
ASML Is Unique
ASML Holding N.V. develops, produces, markets, sells, and services advanced semiconductor equipment systems consisting of lithography, metrology, and inspection related systems for memory and logic chipmakers.
ASML Holding N.V. was founded in 1984 and is headquartered in Veldhoven, the Netherlands.
ASML Technical Analysis
It looks like the price will close this month above its 10-month average (positive signal).
The Relative Strength Index (RSI) has exceeded the downtrend line (positive).
The entire year of 2022 saw a correction to the 200-week moving average in conjunction with the upward trend line from 2008, where it bounced and is now trading just above the inverted head and shoulders neckline and slightly above its fair value.
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On the weekly chart, we have observed a bullish trend pattern like the Inverted Head and Shoulders (HCHI) with a target at $929.80, for this it has to consolidate the crossing of the Neckline surpassing its last highs of $629.3.
However, in the daily graphic, we see bearish divergences between price and the RSI and MACD indicators. Therefore, I expect a correction before continuing its bullish trajectory.
We set our potential maximum loss below the 61.8% correction of the entire impulse from the head of the HCHI.
ASML Fundamental Analysis
1Snowflake Analysis
ASML reported strong Q4 2022 earnings, and the investment thesis remains unchanged. The company is considered exceptional due to its consistent performance. The stock price has risen recently, but valuation is still reasonable but not as undervalued as before.
ASML is immune to the headwinds affecting the semiconductor industry due to high demand and long delivery times. The company had a strong quarter with expected growth of 25% in 2023.
ASML is currently unaffected by the economic slowdown in the semiconductor industry and had better than expected sales and earnings. Sales reached 6.4 billion euros, growing 29% YoY. EUV revenue was 2.3 billion euros with 18 tools shipped, but revenue recognized from only 13.
ASML had a better-than-expected gross margin of 51.5% in Q4, mostly due to additional upgrade business and an insurance settlement. The company had high operating and net margins. Management expects 2023 sales to grow over 25% with a slight improvement in gross margin. Despite industry uncertainties due to inflation, rising interest rates, recession risk, and geopolitical factors, the stock market could start pricing in a recovery in the second half of the year.
Customers expect a rebalancing of semiconductor inventories in H1 2023 and a business rebound in H2 2023, potentially driven by the post-COVID opening of China. ASML is immune to industry problems due to customers' need for strategic long-term investments and strong demand for their systems, which still exceeds their capacity. The company projects 25% growth in total revenue and improvement in gross margins in 2023, with Extreme Ultraviolet (EUV) revenue growing 40% and non-EUV revenue growing 30%. The long-term growth opportunity for ASML remains intact due to the growing demand for semiconductors and the company's monopoly in the fabrication of EUV lithography machines.
ASML is up more than 85% from its lows of the year, but the stock is also more than 20% below historical highs. The semiconductor sector has been strong lately, arguably due to the reopening in China.
In a nutshell, ASML is an excellent company, and the most recent numbers confirm that. Valuation is still reasonable or even attractive, but the stock is no longer deeply undervalued as it was a few months ago.
Thank you for being there!
By Pepe Ortega
31 Jan 2023
"This article is for informational purposes only and is not intended as a solicitation, offer, advice, or recommendation to invest. It is important to note that the value and potential risks of any investment can vary depending on multiple factors. Ultimately, any investment decision and associated risk are the responsibility of the individual."
The Snowflake is a visual summary of our company analysis based on five fundamental areas: Value, Future, Past, Health and Dividend. It gives you an instant snapshot of company’s investment profile, helping you quickly decide if it is worth researching any further.
Each area has six metrics we measure a company against, which it either passes or fails.
The colour of the Snowflake relates to its size. The more metrics a company passes, the larger and greener the Snowflake becomes. Inversely, the fewer metrics a company passes, the smaller and redder the Snowflake will be.
The snowflake is not a buy or sell recommendation. It simply represents how attractive a company's fundamentals are. While its colour changes from red to green depending on how many checks the company passes, a low score in a particular assessment criterion should not necessarily exclude a stock from investment consideration.