Shares of ASML (ASML, Financial) saw a notable decline today, dropping by 6.19%, with the stock price now at $685.25. This movement is primarily attributed to the company's recent earnings call, where management shared a less optimistic forecast for 2025.
ASML Holding NV is a leader in the photolithography systems crucial for semiconductor manufacturing, but the company has recently faced challenges. The most prominent issue has been the slower-than-expected recovery in demand. Moreover, sales from China, which previously contributed to 47% of ASML's revenue, have fallen significantly due to U.S. export restrictions. This percentage is forecasted to stabilize at around 20% by 2025.
The company has adjusted its revenue projection for 2025 to between 30 billion and 35 billion euros ($32.7 billion to $38.1 billion). This is a reduction from the earlier estimate of 30 billion to 40 billion euros, influenced by weaker customer orders from key partners such as Intel and Samsung. However, ASML expects some of this delayed demand to shift to 2026.
Despite current setbacks, ASML is optimistic about future growth opportunities, particularly in the artificial intelligence (AI) sector. This suggests that the recent challenges might be temporary and not indicative of long-term industry issues.
In terms of valuation, ASML is currently rated as "Modestly Undervalued" as per its GF Value of $847.26. The stock maintains a healthy financial standing, demonstrated by a strong Altman Z-score of 8.68, reflecting its financial soundness. The company's operating margin is also expanding, which is a positive sign of profitability. Nonetheless, ASML's P/E ratio of 35.64 indicates a high valuation in comparison to industry medians, implying that the stock might be priced for future growth.
ASML's dividend growth remains robust, with a five-year growth rate of 31.8%. Investors might also take comfort in the company's strong market position and strategic alliances with major semiconductor manufacturers like TSMC, Samsung, and Intel. While the current challenges are significant, ASML's long-term growth potential, bolstered by advancements in AI, provides reasons for optimism.
