ASML's Surging Bookings and Stock Slump: A Golden Opportunity for Investors?

ASML's Bookings Surged, but the Stock Slumped. Is This a Golden Opportunity to Buy the Stock?

Share prices of ASML (NASDAQ: ASML) sank this week after it delivered its second-quarter report, even though its bookings surged in the period. The stock is still up about 25% year to date. The Dutch semiconductor equipment manufacturer is currently in the midst of what it has described as a transition year as it introduces its newest technology, a high numerical aperture extreme ultraviolet lithography system, or High NA EUV for short. The impact of those transition efforts could be seen in the company's Q2 results, as revenue fell nearly 10% year over year to 6.2 billion euros ($6.8 billion), but came in at the top of the company's guidance range of 5.8 billion euros ($6.3 billion) to 6.2 billion euros ($6.8 billion). Its equipment sales dropped 15% to 4.8 billion euros ($5.2 billion), while its service revenue rose nearly 14% year over year to 1.5 billion euros ($1.6 billion). The company sold 89 new lithography systems and 11 used systems in Q2 compared to 107 new and six used systems in the prior-year period. In Q1, it sold 66 new lithography systems and four used systems. The big news in the quarter, though, was a big jump in bookings -- new orders for which contracts have been signed, a metric that provides an indication of future growth. The company had 5.6 billion euros ($6.1 billion) in bookings for the quarter, up 55% from 3.6 billion euros ($3.9 billion) in Q1 and a 24% increase from the 4.5 billion euros ($4.9 billion) in bookings it had in Q2 2023. Management noted that 2.5 billion euros ($2.7 billion) of those bookings were for EUV machines. It ended the quarter with a backlog of 39 billion euros ($42.6 billion). For the third quarter, management forecast sales of 6.7 billion euros ($7.3 billion) to 7.3 billion euros ($8.0 billion); in Q3 2023, it generated 6.7 billion euros in sales. Image source: Getty Images While the bookings number could have gotten investors excited, it was overshadowed by news that the U.S. is considering imposing more severe trade restrictions to crack down on companies that sell advanced semiconductor technology to China. Those restrictions would also apply to foreign companies such as ASML that use U.S. technology. Nearly half of the systems ASML shipped in the first half of this year went to China, although none of those were its most advanced systems, and China now makes up only 20% of its order backlog. Is this a buying opportunity? ASML trades at a forward price-to-earnings multiple of about 44 based on 2024 estimates. However, it is set to significantly grow its EPS next year, so based on 2025 estimates, that multiple drops to only 28. ASML PE Ratio (Forward) data by YCharts. With the company not yet benefiting from the artificial intelligence (AI) chip boom and its new High NA EUV machines set to start shipping in much more substantial numbers next year, that valuation looks attractive. ASML is the only company that can provide High NA EUV technology, so as demand for cutting-edge chips continues to increase and manufacturers look to shrink chip sizes, it should see strong demand for these new systems. The potential for further geopolitical tensions around China, and for tighter restrictions around selling chip technology to it, adds risk to the ASML story. However, ASML is not a China story, and its new technology is not expected to be sold into the country. Moreover, according to Reuters, its CFO recently said that if restrictions prevent it from shipping even its less-advanced machines to China, it would likely be able to find other buyers for the backlog of machines that Chinese companies have already ordered. As such, I think this recent sell-off in the stock looks like a good buying opportunity. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and ASML wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $722,626!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Where Will ASML Holding Stock Be in 5 Years? | The Motley Fool

Can this semiconductor equipment giant come out of its latest slump and become a winner over the next five years? ASML Holding (ASML -3.11%) is a critical player in the semiconductor industry, as chipmakers and foundries use its equipment to manufacture chips. That explains why the Dutch semiconductor equipment giant has clocked impressive gains on the stock market in the past five years. The robust demand for ASML's chipmaking equipment to fulfill the growing need for semiconductors has led to a nice jump in its revenue and earnings, as seen in the preceding chart. The good part is that ASML seems built for more growth over the next five years, as the demand for its offerings remains solid amid the artificial intelligence (AI) boom. This became evident from the company's results for the second quarter of 2024, released on July 17. Let's take a closer look at ASML's latest quarterly performance and check why investors can expect more upside in this semiconductor stock over the next five years. All eyes were on the bookings ASML received in the second quarter, and that figure of 5.6 billion euros was well ahead of analysts' expectations of 4.41 billion euros. ASML's bookings stood at 4.5 billion euros in the same quarter last year and 3.6 billion euros in the first quarter of 2024. So the company's order book increased nicely last quarter, both sequentially and on a year-over-year basis. It's worth noting that ASML received 2.5 billion euros' worth of orders for its extreme ultraviolet (EUV) lithography machines last quarter, accounting for almost half of its total orders for the period. These EUV machines are used for making advanced chips based on smaller process nodes, which are capable of delivering high computing power while consuming less electricity. Foundries and chipmakers are using these EUV machines to churn out AI chips, which explains why its EUV bookings increased by 56% on a year-over-year basis, contributing to a sizable backlog worth 39 billion euros. However, investors pressed the panic button following ASML's results for a couple of reasons and the stock fell 12%. First, the company's revenue outlook of 7 billion euros for the current quarter is lower than the Street estimate of 7.5 billion euros. Second, concerns about restrictions on ASML's sales to China have also contributed to the sell-off in ASML stock following its latest results. That's because China accounted for almost half of ASML's top line last quarter, and the demand for the latter's older equipment is strong in that country. So reports that the Biden administration is considering imposing stricter restrictions on sales of semiconductor technology to China are weighing on ASML stock. Investors would do well to take a look at the broader picture, as the healthy demand for AI chips over the next five years should allow ASML to overcome any potential loss of business in China should stricter sanctions be imposed. The global AI chip market is expected to generate $296 billion in revenue in 2030, growing at an annual rate of 33% during the forecast period. This should create demand for more EUV lithography equipment. According to Market Digits, the EUV lithography market could generate $37 billion in revenue in 2030, compared with $9 billion last year. ASML has a monopoly in EUV lithography machines, which means that it is set to enjoy robust incremental revenue growth as this market expands in the long run. Moreover, ASML is expecting to return to growth in 2025 following a flat revenue performance in 2024, driven by the recent recovery in the semiconductor market which is fueled by catalysts such as AI. Analysts are expecting its top line to increase 3% in 2024 to $30.2 billion, but the forecast for the next couple of years is quite solid. ASML should be able to sustain such healthy growth for a longer time considering the long-term opportunity in the AI chip market. Analysts are expecting its earnings to increase at a compound annual growth rate of 21% for the next five years. However, ASML's earnings are expected to grow at a much faster pace in 2025 and 2026 following a small decline in the current year from last year's levels of $21.22 per share. There's a good chance that ASML could grow at a faster pace than analysts' expectations over the next five years on the back of AI-driven demand for its chipmaking equipment, and that could lead the market to reward this AI stock with healthy gains. That's why investors would do well to capitalize on the drop in ASML stock following its latest earnings report, as it could bounce back and soar higher in the long run thanks to the catalysts I've discussed.

ASML's Bookings Surged, but the Stock Slumped. Is This a Golden Opportunity to Buy the Stock? | The Motley Fool

Share prices of ASML (ASML -3.11%) sank this week after it delivered its second-quarter report, even though its bookings surged in the period. The stock is still up about 25% year to date. The Dutch semiconductor equipment manufacturer is currently in the midst of what it has described as a transition year as it introduces its newest technology, a high numerical aperture extreme ultraviolet lithography system, or High NA EUV for short. The impact of those transition efforts could be seen in the company's Q2 results, as revenue fell nearly 10% year over year to 6.2 billion euros ($6.8 billion), but came in at the top of the company's guidance range of 5.8 billion euros ($6.3 billion) to 6.2 billion euros ($6.8 billion). Its equipment sales dropped 15% to 4.8 billion euros ($5.2 billion), while its service revenue rose nearly 14% year over year to 1.5 billion euros ($1.6 billion). The company sold 89 new lithography systems and 11 used systems in Q2 compared to 107 new and six used systems in the prior-year period. In Q1, it sold 66 new lithography systems and four used systems. The big news in the quarter, though, was a big jump in bookings -- new orders for which contracts have been signed, a metric that provides an indication of future growth. The company had 5.6 billion euros ($6.1 billion) in bookings for the quarter, up 55% from 3.6 billion euros ($3.9 billion) in Q1 and a 24% increase from the 4.5 billion euros ($4.9 billion) in bookings it had in Q2 2023. Management noted that 2.5 billion euros ($2.7 billion) of those bookings were for EUV machines. It ended the quarter with a backlog of 39 billion euros ($42.6 billion). For the third quarter, management forecast sales of 6.7 billion euros ($7.3 billion) to 7.3 billion euros ($8.0 billion); in Q3 2023, it generated 6.7 billion euros in sales. While the bookings number could have gotten investors excited, it was overshadowed by news that the U.S. is considering imposing more severe trade restrictions to crack down on companies that sell advanced semiconductor technology to China. Those restrictions would also apply to foreign companies such as ASML that use U.S. technology. Nearly half of the systems ASML shipped in the first half of this year went to China, although none of those were its most advanced systems, and China now makes up only 20% of its order backlog. ASML trades at a forward price-to-earnings multiple of about 44 based on 2024 estimates. However, it is set to significantly grow its EPS next year, so based on 2025 estimates, that multiple drops to only 28. With the company not yet benefiting from the artificial intelligence (AI) chip boom and its new High NA EUV machines set to start shipping in much more substantial numbers next year, that valuation looks attractive. ASML is the only company that can provide High NA EUV technology, so as demand for cutting-edge chips continues to increase and manufacturers look to shrink chip sizes, it should see strong demand for these new systems. The potential for further geopolitical tensions around China, and for tighter restrictions around selling chip technology to it, adds risk to the ASML story. However, ASML is not a China story, and its new technology is not expected to be sold into the country. Moreover, according to Reuters, its CFO recently said that if restrictions prevent it from shipping even its less-advanced machines to China, it would likely be able to find other buyers for the backlog of machines that Chinese companies have already ordered. As such, I think this recent sell-off in the stock looks like a good buying opportunity.

Where Will ASML Holding Stock Be in 5 Years?

ASML Holding (NASDAQ: ASML) is a critical player in the semiconductor industry, as chipmakers and foundries use its equipment to manufacture chips. That explains why the Dutch semiconductor equipment giant has clocked impressive gains on the stock market in the past five years. ASML data by YCharts The robust demand for ASML's chipmaking equipment to fulfill the growing need for semiconductors has led to a nice jump in its revenue and earnings, as seen in the preceding chart. The good part is that ASML seems built for more growth over the next five years, as the demand for its offerings remains solid amid the artificial intelligence (AI) boom. This became evident from the company's results for the second quarter of 2024, released on July 17. Let's take a closer look at ASML's latest quarterly performance and check why investors can expect more upside in this semiconductor stock over the next five years. ASML sees big boost in bookings but investors still hit the panic button All eyes were on the bookings ASML received in the second quarter, and that figure of 5.6 billion euros was well ahead of analysts' expectations of 4.41 billion euros. ASML's bookings stood at 4.5 billion euros in the same quarter last year and 3.6 billion euros in the first quarter of 2024. So the company's order book increased nicely last quarter, both sequentially and on a year-over-year basis. It's worth noting that ASML received 2.5 billion euros' worth of orders for its extreme ultraviolet (EUV) lithography machines last quarter, accounting for almost half of its total orders for the period. These EUV machines are used for making advanced chips based on smaller process nodes, which are capable of delivering high computing power while consuming less electricity. Foundries and chipmakers are using these EUV machines to churn out AI chips, which explains why its EUV bookings increased by 56% on a year-over-year basis, contributing to a sizable backlog worth 39 billion euros. However, investors pressed the panic button following ASML's results for a couple of reasons and the stock fell 12%. First, the company's revenue outlook of 7 billion euros for the current quarter is lower than the Street estimate of 7.5 billion euros. Second, concerns about restrictions on ASML's sales to China have also contributed to the sell-off in ASML stock following its latest results. That's because China accounted for almost half of ASML's top line last quarter, and the demand for the latter's older equipment is strong in that country. So reports that the Biden administration is considering imposing stricter restrictions on sales of semiconductor technology to China are weighing on ASML stock. Investors shouldn't miss the bigger picture Investors would do well to take a look at the broader picture, as the healthy demand for AI chips over the next five years should allow ASML to overcome any potential loss of business in China should stricter sanctions be imposed. The global AI chip market is expected to generate $296 billion in revenue in 2030, growing at an annual rate of 33% during the forecast period. This should create demand for more EUV lithography equipment. According to Market Digits, the EUV lithography market could generate $37 billion in revenue in 2030, compared with $9 billion last year. ASML has a monopoly in EUV lithography machines, which means that it is set to enjoy robust incremental revenue growth as this market expands in the long run. Moreover, ASML is expecting to return to growth in 2025 following a flat revenue performance in 2024, driven by the recent recovery in the semiconductor market which is fueled by catalysts such as AI. Analysts are expecting its top line to increase 3% in 2024 to $30.2 billion, but the forecast for the next couple of years is quite solid. ASML Revenue Estimates for Current Fiscal Year data by YCharts ASML should be able to sustain such healthy growth for a longer time considering the long-term opportunity in the AI chip market. Analysts are expecting its earnings to increase at a compound annual growth rate of 21% for the next five years. However, ASML's earnings are expected to grow at a much faster pace in 2025 and 2026 following a small decline in the current year from last year's levels of $21.22 per share. ASML EPS Estimates for Current Fiscal Year data by YCharts There's a good chance that ASML could grow at a faster pace than analysts' expectations over the next five years on the back of AI-driven demand for its chipmaking equipment, and that could lead the market to reward this AI stock with healthy gains. That's why investors would do well to capitalize on the drop in ASML stock following its latest earnings report, as it could bounce back and soar higher in the long run thanks to the catalysts I've discussed. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and ASML wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $722,626!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.