Citi has reduced its price target on ASML Holding NV (LON:0QB8) (AS:ASML: NA) (NASDAQ: ASML), a leading supplier of semiconductor manufacturing equipment, to €1,150 from €1,250, while reaffirming a Buy rating on the stock.
The adjustment comes after a period of weaker investor interest during the summer, influenced by a slower industry cycle and reduced capital expenditure forecasts from Intel (NASDAQ:INTC), which have impacted the outlook for 2025 wafer fabrication equipment (WFE) sales.
ASML's growth projections have been revised by Citi, with a 5% decrease in the 2025 sales estimate for ASML, positioning it slightly above the midpoint of the expected range.
The adjustment is less severe than the 20% fluctuation some investors had anticipated. Despite these near-term headwinds, Citi believes that ASML's long-term prospects remain strong, supported by the potential growth in artificial intelligence (AI) and significant improvements in tool productivity and lithography intensity.
Citi anticipates that ASML's upcoming third-quarter order estimates, projected at €5.5 billion, combined with a positive outcome from the company's Capital Markets Day (CMD), will lead to an uptick in market sentiment and valuation.
The current valuation of ASML shares, trading at approximately 23 times the 2025 earnings, is considered to be near the lowest levels, indicating a potential for recovery.
The reassurance by Citi of ASML's stock rating follows comprehensive discussions with investors and a presentation by ASML's CEO at the Citi Global TMT Conference.
In other recent news, ASML Holding NV has been the subject of various analyst revisions. Deutsche Bank (ETR:DBKGn) cut its target for ASML to €950, citing a predicted 22% decline in China sales by 2025, due to challenges in the semiconductor market.
Despite this, the firm maintained a buy rating. BofA Securities also reduced its price target for ASML, while maintaining a buy rating, due to lowered earnings projections for 2025 and 2026. Morgan Stanley (NYSE:MS) followed suit, adjusting its price target but maintaining an overweight rating.
Meanwhile, UBS downgraded ASML's stock from buy to neutral, and Barclays (LON:BARC) upgraded it from equal weight to overweight. The adjustments are in response to recent developments, including increased export controls on ASML's chipmaking equipment by the Netherlands, aligning with US restrictions, and dissatisfaction expressed by China towards these controls.
InvestingPro Insights
With the recent adjustment of ASML Holding NV's price target by Citi, investors are keenly observing the company's financial health and market position. According to real-time data from InvestingPro, ASML boasts a robust market capitalization of $314.49 billion and maintains a high Price/Earnings (P/E) ratio of 41.93, reflecting a premium valuation in the market. Despite a slight revenue decline over the last twelve months, with a -1.6% revenue growth, ASML's Gross Profit Margin remains strong at 51.44%, indicating efficient cost management and solid profitability.
InvestingPro Tips highlight ASML as a prominent player in the Semiconductors & Semiconductor Equipment industry, with cash flows that can sufficiently cover interest payments. This financial stability is further underscored by the company's impressive track record of maintaining dividend payments for 18 consecutive years, a testament to its commitment to shareholder returns. For investors looking for more insights, there are additional InvestingPro Tips available on the platform, including analysis of ASML's debt levels and valuation multiples.
These metrics and tips are particularly relevant in light of Citi's optimistic view of ASML's long-term prospects. The company's strong fundamentals, combined with its strategic positioning in the semiconductor industry, suggest potential for recovery and growth, aligning with Citi's positive outlook for ASML's future performance.
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