ASML’s Earnings Could Bring The Stock to New Highs

ASML stock price earnings

Key Points

  • ASML's upcoming earnings announcement may be the spark to light this kerosene-filled stock.
  • Markets bet that it could be an even bigger growth story than Nvidia, or so do EPS projections indicate. 
  • Valuations don't lie; institutions are buying ASML stock for a reason, and not even bears dare short it. 
  • 5 stocks we like better than The PNC Financial Services Group

The semiconductor industry has become a focus of every investor portfolio in the past few months, as technology stocks have outperformed almost every other sector in the past 12 months. Led by names like Nvidia Co. NASDAQ: NVDA, the semiconductor rally has another set of lungs, one that has yet to gain the recognition it deserves.

Fears that Nvidia stock may now be overextended are rising, crystalizing a 14% retracement from its all-time high price of $974 a share; it looks like Nvidia needs a breather before potentially returning to its bullish uptrend. Other investors see the potential opportunity in buying Taiwan Semiconductor Manufacturing Co. NYSE: TSM. Yet, geopolitical risks keep the stock from receiving the valuation it deserves.

A third, perhaps underrated name, is in ASML Holding NASDAQ: ASML. While not a direct semiconductor manufacturing player, it is the company that essentially every chipmaker relies on, as it makes the necessary lithography equipment to make these chips.

ASML Today

ASML Holding stock logo
ASMLASML 90-day performance
ASML
$924.97
+5.43 (+0.59%)
(As of 05/17/2024 08:53 PM ET)
52-Week Range
$563.99
$1,056.34
Dividend Yield
0.69%
P/E Ratio
47.24
Price Target
$1,036.00

It’s All About Risk and Reward

While investing in Taiwan Semiconductor may seem a little riskier, especially now that China is threatening to invade Taiwan and compromise the company’s operations, ASML provides investors with a somewhat safe haven.

These two names are co-dependent, meaning that TSMC relies on ASML to provide it with equipment to produce some of the world’s latest lithography technology. This enables TSMC to keep up with its less-than-10 nanometer chip designs.


Because of this relationship, ASML is directly linked to Nvidia’s success and even the success of other more established brands like Intel Co. NASDAQ: INTC.

In fact, Intel is one of ASML’s biggest customers, second only to TSMC. For TSMC, its biggest customers are none other than Nvidia and Apple Inc. NASDAQ: AAPL; investors can connect the role ASML plays in the global supply chain this way.

ASML shareholders are exposed to the upside in the semiconductor industry without worrying about all of these geopolitical risks, especially now that TSMC received an $11 billion grant from the U.S. government in an attempt to onshore semiconductor manufacturing.

Despite these efforts, it will likely take a couple of years before these factories are built and operational, so bringing TSMC’s production capacity to the U.S. won’t be an overnight job. Because of this, the international risk still stands, but not for ASML.

The Gap is Clear For ASML

Two things typically drive stock prices: earnings per share (EPS) growth and how markets value these future potential earnings today. For ASML, Wall Street analysts believe that the upcoming quarterly earnings announcement may catalyze the stock to new highs.

Expecting to see EPS growth of 42% this year emphasizes this first-quarter announcement, especially since the overall semiconductor industry is looking to grow its earnings at an average rate of 26%.

This growth compares to Nvidia’s projected 13% EPS growth in the next 12 months, which is less than half of ASML’s. Not even Taiwan Semiconductor, Nvidia’s leading supplier, stands close to ASML in its 24% projection.

On a valuation basis, the forward P/E ratio comes in handy (as it attempts to value tomorrow’s earnings today), making ASML an exciting proposition. Valued at 31.3x forward P/E, ASML is close to Nvidia’s 32.4x valuation.

If investors could get more than twice the growth at relatively the same price, why would they choose Nvidia stock over ASML? Those who stick with Nvidia simply rely on momentum and market popularity.

Another interesting angle is found in Intel. Analysts boldly bet that its EPS could grow by 115% this year. Yet, markets value these potential future earnings at 17.3x, almost half Nvidia and ASML. The saying “it must be cheap for a reason” applies here.

Considering that TSMC, not Intel, received the bulk of funding in the CHIPS and Science Act, markets may not be too confident that Intel will achieve this growth. However, if markets are wrong and Intel does beat, it is ASML who will deliver all the upside without any uncertainty since Intel cannot succeed without ASML.

Wall Street’s Vote for ASML

Analysts at Wells Fargo & Co. NYSE: WFC boosted their price targets on ASML up to $1,150 a share, calling for a 20% upside from today’s prices. Meanwhile, Nvidia’s consensus price target of $926.3 only gives it 5% to move higher from today.

Markets aren’t the only ones buying ASML’s growth story and bidding up the stock. Over the past quarter, The PNC Financial Services Group Inc. NYSE: PNC increased its position in the stock by 4%, bringing its total stake to $24.8 million.

Fisher Asset Management, known for its macro value strategies, boosted its position by 2%, totaling a $3.4 billion investment in ASML stock.  

Last but not least, bears have no intention of stopping the rally, as short interest in ASML stock declined for two consecutive months, bringing its net short dollar amount to levels not seen since April 2023, when the stock reached a high for that year.

→ Next President (Not Trump. Not Biden.) (From The Freeport Society) (Ad)

Should you invest $1,000 in The PNC Financial Services Group right now?

Before you consider The PNC Financial Services Group, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and The PNC Financial Services Group wasn't on the list.

While The PNC Financial Services Group currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

These 7 Stocks Will Be Magnificent in 2024 Cover

With average gains of 150% since the start of 2023, now is the time to give these stocks a look and pump up your 2024 portfolio.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
NVIDIA (NVDA)
4.7189 of 5 stars
$924.79-2.0%0.02%77.45Moderate Buy$966.55
Taiwan Semiconductor Manufacturing (TSM)
2.2689 of 5 stars
$151.68-0.4%1.13%28.89Moderate Buy$157.00
ASML (ASML)
4.1955 of 5 stars
$924.97+0.6%0.69%47.24Moderate Buy$1,036.00
Intel (INTC)
4.9803 of 5 stars
$31.83-0.6%1.57%33.16Hold$39.58
Apple (AAPL)
4.8343 of 5 stars
$189.87+0.0%0.53%29.53Moderate Buy$204.71
Wells Fargo & Company (WFC)
4.2207 of 5 stars
$61.08+0.0%2.29%12.75Hold$58.99
The PNC Financial Services Group (PNC)
4.9483 of 5 stars
$160.35-0.3%3.87%13.46Hold$157.02
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


Featured Articles and Offers

Search Headlines: