ASML Holding: Share Price Is Still Lofty Despite The Most Recent 16% Plunge

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ASML Holding: Share Price Is Still Lofty Despite The Most Recent 16% Plunge

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ASML Holding's share price dropped 16% on 15 October 2024, losing €49.2 billion in market cap; investors should wait for further price corrections before buying.Despite a revenue surge in 3Q24, net ...

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Roksnana
·10-21
"ASML's constant price target changes reek of manipulation. Lack of transparency serves personal interests."[Thinking]
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investors should wait for further price corrections before buying.Despite a revenue surge in 3Q24, net ...</p>\n\n<a href=\"https://seekingalpha.com/article/4727941-asml-q3-earnings-share-price-still-lofty-despite-most-recent-16-percent-plunge\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4727941-asml-q3-earnings-share-price-still-lofty-despite-most-recent-16-percent-plunge","article_id":"2477058250","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2477058250","pubTimestamp":1729484876,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"ASML Holding's share price dropped 16% on 15 October 2024, losing 49.2 billion in market cap; investors should wait for further price corrections before buying.Despite a revenue surge in 3Q24, net boo","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","ASML":"阿斯麦","IE00BD6J9T35.USD":"NEUBERGER BERMAN NEXT GENERATION MOBILITY \"A\" (USD) ACC","BK4147":"半导体设备","LU0097036916.USD":"贝莱德美国增长A2 USD","BK4588":"碎股","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","LU1734074674.USD":"NINETY ONE GSF ASIA PACIFIC FRANCHISE \"A\"(USD) ACC","ASMLF":"ASML Holding N.V.","LU2063271972.USD":"富兰克林创新领域基金","03165":"华夏欧优股对冲"},"translate_title":"ASML Holding：尽管最近暴跌16%，股价仍然很高","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ASML":0.9,"ASMLF":0.9,"03165":0.6},"content_text":"ASML Holding's share price dropped 16% on 15 October 2024, losing €49.2 billion in market cap; investors should wait for further price corrections before buying.Despite a revenue surge in 3Q24, net bookings fell by 52%, and future growth is expected to slow, with 2024 revenue growth projected at only 2.33%.ASML is still highly dependent on China and will continue to face challenges due to stricter export controls, potentially affecting the company's sales.Valuation analysis based on management's guidance suggests that, current share price is still lofty and there is a potential downside of 13.84%.   Sundry Photography Introduction On 15 October 2024, the share price of ASML Holding (NASDAQ:ASML) (OTCPK:ASMLF) plunged by 16% after information related to the company's 3Q24 results was published earlier due to a technical error. During this period, the company has lost about €49.2 billion in market capitalization. Given that most of the world's semiconductor foundries are dependent on ASML, this may represent a good opportunity for investors to accumulate shares. However, based on my analysis, I believe that investors should hold their horses and not be overly excited. In this report, I will demonstrate why we should wait for the prices to further correct before starting to accumulate shares of ASML. Latest Developments ASML Performance 4Q24 (Earnings Presentation) In 3Q24, total revenues surged from €6.24 billion to €7.47 billion, representing a growth of 11.90% year-on-year. During this period, the company has sold 17 more lithography systems as compared to the same period last year. However, total net bookings plunged by 52% to €2.63 billion from €5.57 billion the same period last year. Gross margin declined from 51.87% the same period last year to 50.80% but was offset declines in operating expenses; total operating income margin remain at 32.70%. Looking forward, the company expects 4Q24 sales to range between €8.8 billion to €9.2 billion and gross margin to deteriorate further to between 49% and 50%. Despite lower gross margin, the company expects to spend lower on R&D and SG&A costs, offsetting deteriorations in gross margin. ASML's Growth Rate To Continue Deteriorating Although developments in artificial intelligence is likely to continue providing tailwinds for demand, it seems clear that the company's growth has peaked. ASML's 4Q24 sales guidance suggests that the company will likely post a revenue of €28.2 billion, representing a growth of only 2.33% this year. The slowdown in growth is primarily due to a slower recovery in the traditional non-AI related markets.   ASML Historical Revenue Growth (Company Filings) Over the past three years, we have seen an average growth of around 25% per annum. Moreover, the company expects to generate between €44 billion and €60 billion in sales by FY2030, representing an average growth of 13% per annum. It is clear that the company's growth has declined, and it is unlikely that we will continue to see an elevated growth rate of about 25%. After all, in the latest earnings call, Christophe Fouquet, Chief Executive of ASML, had said, \"without AI, the market would be very sad\". 'China Issue' To Continue Weighing On ASML Apart from ASML's latest revenue woes, the company is also facing a lot of challenges due to export controls. The Dutch government has aligned with the United States and will prevent ASML from selling the company's more advanced machines to China; even older machines will be subjected to this regulation. The Dutch's Prime Minister, Dick Schoof, will also not allow ASML to service China's equipment when the company's license expires this year. ASML's Geographical Exposure (Company Filings) More importantly, ASML's remains highly exposed to China. In 2024, close to half of the company's revenue is attributable to China. Despite stringent export controls and a slew of new regulations, the company's biggest market is still in China. Roger Dassen, ASML's Chief Financial Officer have stated that sales in China will normalize to 20% of total revenue from about 49%. It is important to highlight that this is based on the current regulatory environment. If regulations further tighten, there is a strong likelihood that sales will further deteriorate, falling short of the company's projections. Markets Are Still Pricing In A Premium Valuation Analysis (Author's Projections) Even though the company has plunged by close to 16% since Tuesday, the current share price of €664.50 implies that the markets are extremely optimistic about the company's growth rate. If we assume: (1) the company's gross margin eventually reaches its target of 60% by FY2030, (2) current share price of €664.50, and (3) all other margins (e.g. SG&A and R&D) to maintain at its current level, a reverse valuation analysis will suggest that the market is pricing in a revenue growth of 16% per annum between FY2025 and FY2030. In other words, markets are pricing in a premium and expects the company to beat its revenue growth rate by 3% per annum for the next six years. To put it into context, markets are expecting ASML to generate €70 billion in revenues as compared to the company's guidance of €60 billion. ASML Is A Cash Generator And Has A History Of Giving Back To Its Shareholders Do not get me wrong, ASML has been an exceptional company that has a strong balance sheet and strong liquidity profile. Moreover, the company has stable margins and has proved to be able to effectively generate sustainable cashflows over the years. Over the past 10 years, the company has generated €35 billion in free cash flow.   ASML's Historical Free Cash Flow (Company Filings) Moreover, the company has a strong history of giving back to its shareholders. Over the past five years, the company's share buyback plan has reached a cumulative share buyback of €22.80 billion. ASML has also given back about a total of 10 billion in dividends over the past five years. Valuation Based On Management's Guidance Suggests Share Price Is Lofty Given that the management has provided so much color, I have utilized these inputs to conduct a valuation analysis of ASML's share price. My valuation model will be based on the following inputs: (1) revenue growth of 2.33% in FY2024 and 13.41% between FY2025 to FY2030, (2) gross margins to improve from 51.29% in FY2023 to 60% by FY30, (3) other margins such as SG&A and R&D to maintain at current levels, and (4) WACC of 8.57% and terminal growth rate of 5%. Valuation Analysis (Author's Projections) Based on these assumptions, which are fairly generous with a terminal growth rate of 5%, the valuation model based on discounted cashflows suggests that the company's implied share price of €572.52. Based on the current share price of €664.50, it does seem that the price of ASML is still quite lofty. Closing Remarks ASML's share price has declined by about 16% in the most recent sell off, indicating a 33% of decrease from the company's peak in July 2024. Given the current artificial intelligence hype train and investors' interest in semiconductor related stocks, it is not surprising that many are using this opportunity to accumulate shares. However, I believe that market participants are still pricing in a strong premium in ASML's shares. Using inputs from the company's management, the implied share price is 572.52, representing a potential further downside of 13.84%. Given the lack of any margin of safety, investors should not get overly excited; I believe that it will be wise for us to hold out longer before we see the value that we want to capitalize.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"Business Data,analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":362400193802248,"gmtCreate":1729512521478,"gmtModify":1729513007774,"author":{"id":"4141547829789112","authorId":"4141547829789112","name":"Roksnana","avatar":"https://community-static.tradeup.com/news/8d45ec43d9d33b5d6cde51ffb3f2f349","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":9,"crmLevelSwitch":1,"idStr":"4141547829789112","authorIdStr":"4141547829789112"},"htmlText":"\"ASML's constant price target changes reek of manipulation. Lack of transparency serves personal interests.\"[Thinking]&nbsp;&nbsp;","listText":"\"ASML's constant price target changes reek of manipulation. Lack of transparency serves personal interests.\"[Thinking]&nbsp;&nbsp;","text":"\"ASML's constant price target changes reek of manipulation. Lack of transparency serves personal interests.\"[Thinking]","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/362400193802248","repostId":2477058250,"repostType":2,"repost":{"id":"2477058250","kind":"highlight","pubTimestamp":1729484876,"share":"https://ttm.financial/m/news/2477058250?lang=&edition=fundamental","pubTime":"2024-10-21 12:27","market":"sg","language":"en","title":"ASML Holding: Share Price Is Still Lofty Despite The Most Recent 16% Plunge","url":"https://stock-news.laohu8.com/highlight/detail?id=2477058250","media":"seekingalpha","summary":"ASML Holding's share price dropped 16% on 15 October 2024, losing 49.2 billion in market cap; investors should wait for further price corrections before buying.Despite a revenue surge in 3Q24, net boo","content":"<html><body><ul><li>ASML Holding's share price dropped 16% on 15 October 2024, losing €49.2 billion in market cap; investors should wait for further price corrections before buying.</li><li>Despite a revenue surge in 3Q24, net bookings fell by 52%, and future growth is expected to slow, with 2024 revenue growth projected at only 2.33%.</li><li>ASML is still highly dependent on China and will continue to face challenges due to stricter export controls, potentially affecting the company's sales.</li><li>Valuation analysis based on management's guidance suggests that, current share price is still lofty and there is a potential downside of 13.84%.</li></ul><p><figure><picture> <img fetchpriority=\"high\" height=\"3885px\" sizes=\"(max-width: 768px) calc(100vw - 36px), (max-width: 1024px) calc(100vw - 132px), (max-width: 1200px) calc(66.6vw - 72px), 600px\" src=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w750\" srcset=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg?io=getty-c-w240 240w\" width=\"5825px\"/> </picture><figcaption> <p>Sundry Photography</p></figcaption></figure></p> <h2>Introduction</h2> <p>On 15 October 2024, the share price of ASML Holding (<span>NASDAQ:ASML</span>) (OTCPK:ASMLF) plunged by 16% after information related to the company's 3Q24 results was published earlier due to a technical error<span>. During this period, the company has lost about €49.2 billion in market capitalization.</span></p> <p>Given that most of the world's semiconductor foundries are dependent on ASML, this may represent a good opportunity for investors to accumulate shares. However, based on my analysis, I believe that investors should hold their horses and not be overly excited. In this report, I will demonstrate why we should wait for the prices to further correct before starting to accumulate shares of ASML.</p> <h2>Latest Developments</h2> <p><figure contenteditable=\"false\"><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/10/20/59780092-17294098969644122.png\"/></span><figcaption><p>ASML Performance 4Q24 <span>(Earnings Presentation)</span></p></figcaption></figure></p> <p>In 3Q24, total revenues surged from €6.24 billion to €7.47 billion, representing a growth of 11.90% year-on-year. During this period, the company has sold 17 more lithography systems as compared to the same period last year. However, total net bookings plunged by 52% to €2.63 billion from €5.57 billion the same period last year. Gross margin declined from 51.87% the same period last year to 50.80% but was offset declines in operating expenses; total operating income margin remain at 32.70%.</p> <p>Looking forward, the company expects 4Q24 sales to range between €8.8 billion to €9.2 billion and gross margin to deteriorate further to between 49% and 50%. Despite lower gross margin, the company expects to spend lower on R&amp;D and SG&amp;A costs, offsetting deteriorations in gross margin.</p> <h2>ASML's Growth Rate To Continue Deteriorating</h2> <p>Although developments in artificial intelligence is likely to continue providing tailwinds for demand, it seems clear that the company's growth has peaked. ASML's 4Q24 sales guidance suggests that the company will likely post a revenue of €28.2 billion, representing a growth of only 2.33% this year. The slowdown in growth is primarily due to a slower recovery in the traditional non-AI related markets.</p> <p><figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/10/20/59780092-17294176757650776.png\"/> </picture><figcaption><p>ASML Historical Revenue Growth <span>(Company Filings)</span></p></figcaption></figure></p> <p>Over the past three years, we have seen an average growth of around 25% per annum. Moreover, the company expects to generate between €44 billion and €60 billion in sales by FY2030, representing an average growth of 13% per annum. It is clear that the company's growth has declined, and it is unlikely that we will continue to see an elevated growth rate of about 25%. After all, in the latest earnings call, Christophe Fouquet, Chief Executive of ASML, had said, \"without AI, the market would be very sad\".</p> <h2>'China Issue' To Continue Weighing On ASML</h2> <p>Apart from ASML's latest revenue woes, the company is also facing a lot of challenges due to export controls. The Dutch government has aligned with the United States and will prevent ASML from selling the company's more advanced machines to China; even older machines will be subjected to this regulation. The Dutch's Prime Minister, Dick Schoof, will also not allow ASML to service China's equipment when the company's license expires this year.</p> <p><figure contenteditable=\"false\"><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/10/20/59780092-1729419452676056.png\"/></span><figcaption><p>ASML's Geographical Exposure <span>(Company Filings)</span></p></figcaption></figure></p> <p>More importantly, ASML's remains highly exposed to China. In 2024, close to half of the company's revenue is attributable to China. Despite stringent export controls and a slew of new regulations, the company's biggest market is still in China. Roger Dassen, ASML's Chief Financial Officer have stated that sales in China will normalize to 20% of total revenue from about 49%.</p> <p>It is important to highlight that this is based on the current regulatory environment. If regulations further tighten, there is a strong likelihood that sales will further deteriorate, falling short of the company's projections.</p> <h2>Markets Are Still Pricing In A Premium</h2> <p><figure contenteditable=\"false\"><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/10/20/59780092-1729418423681526.png\"/></span><figcaption><p>Valuation Analysis <span>(Author's Projections)</span></p></figcaption></figure></p> <p>Even though the company has plunged by close to 16% since Tuesday, the current share price of €664.50 implies that the markets are extremely optimistic about the company's growth rate.</p> <p>If we assume: (1) the company's gross margin eventually reaches its target of 60% by FY2030, (2) current share price of €664.50, and (3) all other margins (e.g. SG&amp;A and R&amp;D) to maintain at its current level, a reverse valuation analysis will suggest that the market is pricing in a revenue growth of 16% per annum between FY2025 and FY2030. In other words, markets are pricing in a premium and expects the company to beat its revenue growth rate by 3% per annum for the next six years. To put it into context, markets are expecting ASML to generate €70 billion in revenues as compared to the company's guidance of €60 billion.</p> <h2>ASML Is A Cash Generator And Has A History Of Giving Back To Its Shareholders</h2> <p>Do not get me wrong, ASML has been an exceptional company that has a strong balance sheet and strong liquidity profile. Moreover, the company has stable margins and has proved to be able to effectively generate sustainable cashflows over the years. Over the past 10 years, the company has generated €35 billion in free cash flow.</p> <p><figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/10/20/59780092-1729421353363598.png\"/> </picture><figcaption><p>ASML's Historical Free Cash Flow <span>(Company Filings)</span></p></figcaption></figure></p> <p>Moreover, the company has a strong history of giving back to its shareholders. Over the past five years, the company's share buyback plan has reached a cumulative share buyback of €22.80 billion. ASML has also given back about a total of 10 billion in dividends over the past five years.</p> <h2>Valuation Based On Management's Guidance Suggests Share Price Is Lofty</h2> <p>Given that the management has provided so much color, I have utilized these inputs to conduct a valuation analysis of ASML's share price. My valuation model will be based on the following inputs: (1) revenue growth of 2.33% in FY2024 and 13.41% between FY2025 to FY2030, (2) gross margins to improve from 51.29% in FY2023 to 60% by FY30, (3) other margins such as SG&amp;A and R&amp;D to maintain at current levels, and (4) WACC of 8.57% and terminal growth rate of 5%.</p> <p><figure contenteditable=\"false\"><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/10/20/59780092-17294223372009742.png\"/></span><figcaption><p>Valuation Analysis <span>(Author's Projections)</span></p></figcaption></figure></p> <p>Based on these assumptions, which are fairly generous with a terminal growth rate of 5%, the valuation model based on discounted cashflows suggests that the company's implied share price of €572.52. Based on the current share price of €664.50, it does seem that the price of ASML is still quite lofty.</p> <h2>Closing Remarks</h2> <p>ASML's share price has declined by about 16% in the most recent sell off, indicating a 33% of decrease from the company's peak in July 2024. Given the current artificial intelligence hype train and investors' interest in semiconductor related stocks, it is not surprising that many are using this opportunity to accumulate shares.</p> <p>However, I believe that market participants are still pricing in a strong premium in ASML's shares. Using inputs from the company's management, the implied share price is 572.52, representing a potential further downside of 13.84%. Given the lack of any margin of safety, investors should not get overly excited; I believe that it will be wise for us to hold out longer before we see the value that we want to capitalize.</p> <div></div> <p>Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>ASML Holding: Share Price Is Still Lofty Despite The Most Recent 16% Plunge</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nASML Holding: Share Price Is Still Lofty Despite The Most Recent 16% Plunge\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-21 12:27 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4727941-asml-q3-earnings-share-price-still-lofty-despite-most-recent-16-percent-plunge><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>ASML Holding's share price dropped 16% on 15 October 2024, losing €49.2 billion in market cap; investors should wait for further price corrections before buying.Despite a revenue surge in 3Q24, net ...</p>\n\n<a href=\"https://seekingalpha.com/article/4727941-asml-q3-earnings-share-price-still-lofty-despite-most-recent-16-percent-plunge\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1200829368/image_1200829368.jpg","relate_stocks":{"BK4585":"ETF&股票定投概念","ASML":"阿斯麦","IE00BD6J9T35.USD":"NEUBERGER BERMAN NEXT GENERATION MOBILITY \"A\" (USD) ACC","BK4147":"半导体设备","LU0097036916.USD":"贝莱德美国增长A2 USD","BK4588":"碎股","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","LU1734074674.USD":"NINETY ONE GSF ASIA PACIFIC FRANCHISE \"A\"(USD) ACC","ASMLF":"ASML Holding N.V.","LU2063271972.USD":"富兰克林创新领域基金","03165":"华夏欧优股对冲"},"source_url":"https://seekingalpha.com/article/4727941-asml-q3-earnings-share-price-still-lofty-despite-most-recent-16-percent-plunge","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2477058250","content_text":"ASML Holding's share price dropped 16% on 15 October 2024, losing €49.2 billion in market cap; investors should wait for further price corrections before buying.Despite a revenue surge in 3Q24, net bookings fell by 52%, and future growth is expected to slow, with 2024 revenue growth projected at only 2.33%.ASML is still highly dependent on China and will continue to face challenges due to stricter export controls, potentially affecting the company's sales.Valuation analysis based on management's guidance suggests that, current share price is still lofty and there is a potential downside of 13.84%.   Sundry Photography Introduction On 15 October 2024, the share price of ASML Holding (NASDAQ:ASML) (OTCPK:ASMLF) plunged by 16% after information related to the company's 3Q24 results was published earlier due to a technical error. During this period, the company has lost about €49.2 billion in market capitalization. Given that most of the world's semiconductor foundries are dependent on ASML, this may represent a good opportunity for investors to accumulate shares. However, based on my analysis, I believe that investors should hold their horses and not be overly excited. In this report, I will demonstrate why we should wait for the prices to further correct before starting to accumulate shares of ASML. Latest Developments ASML Performance 4Q24 (Earnings Presentation) In 3Q24, total revenues surged from €6.24 billion to €7.47 billion, representing a growth of 11.90% year-on-year. During this period, the company has sold 17 more lithography systems as compared to the same period last year. However, total net bookings plunged by 52% to €2.63 billion from €5.57 billion the same period last year. Gross margin declined from 51.87% the same period last year to 50.80% but was offset declines in operating expenses; total operating income margin remain at 32.70%. Looking forward, the company expects 4Q24 sales to range between €8.8 billion to €9.2 billion and gross margin to deteriorate further to between 49% and 50%. Despite lower gross margin, the company expects to spend lower on R&D and SG&A costs, offsetting deteriorations in gross margin. ASML's Growth Rate To Continue Deteriorating Although developments in artificial intelligence is likely to continue providing tailwinds for demand, it seems clear that the company's growth has peaked. ASML's 4Q24 sales guidance suggests that the company will likely post a revenue of €28.2 billion, representing a growth of only 2.33% this year. The slowdown in growth is primarily due to a slower recovery in the traditional non-AI related markets.   ASML Historical Revenue Growth (Company Filings) Over the past three years, we have seen an average growth of around 25% per annum. Moreover, the company expects to generate between €44 billion and €60 billion in sales by FY2030, representing an average growth of 13% per annum. It is clear that the company's growth has declined, and it is unlikely that we will continue to see an elevated growth rate of about 25%. After all, in the latest earnings call, Christophe Fouquet, Chief Executive of ASML, had said, \"without AI, the market would be very sad\". 'China Issue' To Continue Weighing On ASML Apart from ASML's latest revenue woes, the company is also facing a lot of challenges due to export controls. The Dutch government has aligned with the United States and will prevent ASML from selling the company's more advanced machines to China; even older machines will be subjected to this regulation. The Dutch's Prime Minister, Dick Schoof, will also not allow ASML to service China's equipment when the company's license expires this year. ASML's Geographical Exposure (Company Filings) More importantly, ASML's remains highly exposed to China. In 2024, close to half of the company's revenue is attributable to China. Despite stringent export controls and a slew of new regulations, the company's biggest market is still in China. Roger Dassen, ASML's Chief Financial Officer have stated that sales in China will normalize to 20% of total revenue from about 49%. It is important to highlight that this is based on the current regulatory environment. If regulations further tighten, there is a strong likelihood that sales will further deteriorate, falling short of the company's projections. Markets Are Still Pricing In A Premium Valuation Analysis (Author's Projections) Even though the company has plunged by close to 16% since Tuesday, the current share price of €664.50 implies that the markets are extremely optimistic about the company's growth rate. If we assume: (1) the company's gross margin eventually reaches its target of 60% by FY2030, (2) current share price of €664.50, and (3) all other margins (e.g. SG&A and R&D) to maintain at its current level, a reverse valuation analysis will suggest that the market is pricing in a revenue growth of 16% per annum between FY2025 and FY2030. In other words, markets are pricing in a premium and expects the company to beat its revenue growth rate by 3% per annum for the next six years. To put it into context, markets are expecting ASML to generate €70 billion in revenues as compared to the company's guidance of €60 billion. ASML Is A Cash Generator And Has A History Of Giving Back To Its Shareholders Do not get me wrong, ASML has been an exceptional company that has a strong balance sheet and strong liquidity profile. Moreover, the company has stable margins and has proved to be able to effectively generate sustainable cashflows over the years. Over the past 10 years, the company has generated €35 billion in free cash flow.   ASML's Historical Free Cash Flow (Company Filings) Moreover, the company has a strong history of giving back to its shareholders. Over the past five years, the company's share buyback plan has reached a cumulative share buyback of €22.80 billion. ASML has also given back about a total of 10 billion in dividends over the past five years. Valuation Based On Management's Guidance Suggests Share Price Is Lofty Given that the management has provided so much color, I have utilized these inputs to conduct a valuation analysis of ASML's share price. My valuation model will be based on the following inputs: (1) revenue growth of 2.33% in FY2024 and 13.41% between FY2025 to FY2030, (2) gross margins to improve from 51.29% in FY2023 to 60% by FY30, (3) other margins such as SG&A and R&D to maintain at current levels, and (4) WACC of 8.57% and terminal growth rate of 5%. Valuation Analysis (Author's Projections) Based on these assumptions, which are fairly generous with a terminal growth rate of 5%, the valuation model based on discounted cashflows suggests that the company's implied share price of €572.52. Based on the current share price of €664.50, it does seem that the price of ASML is still quite lofty. Closing Remarks ASML's share price has declined by about 16% in the most recent sell off, indicating a 33% of decrease from the company's peak in July 2024. Given the current artificial intelligence hype train and investors' interest in semiconductor related stocks, it is not surprising that many are using this opportunity to accumulate shares. However, I believe that market participants are still pricing in a strong premium in ASML's shares. Using inputs from the company's management, the implied share price is 572.52, representing a potential further downside of 13.84%. Given the lack of any margin of safety, investors should not get overly excited; I believe that it will be wise for us to hold out longer before we see the value that we want to capitalize.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":0,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}