On Friday, Bernstein SocGen adjusted its price target for ASML Inc. (NASDAQ:AS:ASML), a leading supplier of semiconductor manufacturing equipment, reducing it to $1,052 from the previous $1,072. Despite the downward revision, the firm maintained its Outperform rating on the stock.
The adjustment comes amidst expectations that the first quarter will reflect the sentiment of a transition year for 2024. However, Bernstein SocGen remains confident in ASML's growth prospects, particularly citing the €9.2 billion in bookings recorded in the last quarter as evidence of strong growth potential for 2025.
The analyst noted that while bookings can be uneven on a quarterly basis, the current consensus estimate for bookings stands at €4.6 billion, which is seen as maintaining a solid momentum for the company’s 2025 order book.
In the fourth quarter, China accounted for 39% of ASML's system sales, a slight decrease from the previous quarter's peak of 46%. Sales to China are expected to continue to be robust throughout the first half of 2024, with the potential to contribute to DUV revenue growth.
Bernstein SocGen also highlighted that while it is optimistic about ASML's top-line growth for 2024, any upward revisions to the company's guidance are more likely to occur later in the year. The firm is looking for evidence of utilization rates rebounding and believes it is too early to factor in potential revenues driven by artificial intelligence (AI) applications. More insights on AI's impact on ASML are anticipated at the company’s Capital Markets Day in November.
The analyst's projections for ASML in the near term have been slightly reduced, but expectations for 2024 and 2025 remain largely unchanged. ASML is forecasted to achieve mid-single-digit top-line growth in 2024 and surpass the midpoint of guidance for 2025, with margins reaching 55%.
Bernstein SocGen extended its model to 2026, predicting modest top-line growth of 8% for ASML, driven by an increase in EUV technology adoption. The firm's earnings estimate for 2025 stands firm at €30.5 per share, and the target price-to-earnings ratio is set at 32 times to reach the updated price target.
InvestingPro Insights
Bernstein SocGen's recent price target adjustment for ASML aligns with some of the cautious sentiment reflected in the InvestingPro Tips. Analysts have noted that ASML is trading at a high earnings multiple and possesses a high P/E ratio relative to near-term earnings growth, suggesting that the stock may be valued optimistically in terms of its near-term earnings potential. Despite this, ASML remains a prominent player in the Semiconductors & Semiconductor Equipment industry, with cash flows that can sufficiently cover interest payments and a track record of maintaining dividend payments for 18 consecutive years, indicating financial stability and a commitment to shareholder returns.
From the InvestingPro Data, ASML's market capitalization stands at a substantial $388.56 billion, with a high P/E ratio of 46.59 as of the last twelve months ending Q4 2023. The company's revenue growth has been impressive, with a 30.16% increase over the last twelve months and a gross profit margin of 51.29%, underscoring ASML's strong profitability. Moreover, the company's returns have been robust, with a 51.32% one-year price total return, reflecting investor confidence and market performance.
For readers looking to delve deeper into ASML's financial health and future prospects, additional InvestingPro Tips are available on the platform, totaling 19 in number. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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