To The Moon

• ASML $ASML Holding NV(ASML)$ fell 7.09% last Wednesday on earnings miss.

• ASML is currently trading 17.94% lower than its all-time high.

1Q2024 Earnings

• Net sales were €5.29B, missing the estimate of €5.39B. Net sales grew by -21.6% year-over-year.

• EPS was €3.11B, beating the estimate of €3B, but grew by -37.3% year-over-year.

• The biggest disappointment is the bookings. Bookings fell by 4% year-over-year or 61% quarter-over-quarter to €3.6B, which are about 20% below estimate.

• Gross Profit Margin was 51%, higher than the estimated 48.8%.

• Operating Margin was just 26.3% relative to 32.7% in the same quarter of 2023.

• ASML has forecasted that 10-15% of China sales this year will be hampered by export control measures. Still, ASML expects "strong" demand from China to continue for the rest of this year, Chief Financial Officer Roger Dassen said.

Source: Bloomberg

Earnings Forecast:

• For the full year of 2024, ASML reported a net sales revenue of € 27.6 billion, with a net income of €7.8 billion and a gross profit margin of 51.3%.

• ASML estimates that the net sales for 2024 will be similar to those in 2023.

Conclusion:

• Investors are concerned that the soft order intake may persist. However, we believe there is still a strong, long-term demand for chips, indicating that the demand for EUV technology will regain its high growth momentum.

• ASML management aptly described 2024 as a transition year, laying the groundwork for a robust 2025. Therefore, investors should anticipate only moderate revenue growth in 2024, with more significant growth anticipated in 2025.

• Order intake for the most advanced EUV systems, known for their high prices and lengthy lead times, tends to fluctuate irregularly.

• ASML stands as the sole provider of EUV (extreme ultraviolet) lithography technology, with substantial entry barriers likely solidifying its monopoly in the EUV market in the years ahead.

• China remains ASML’s largest market, accounting for 49% of system sales in the first quarter, especially in the EUV segment. Consequently, any further export bans to China would significantly impact ASML's revenue.

• Since 2019, ASML has been prohibited from exporting its EUV lithography technology to China. Additionally, starting January 2024, ASML will be unable to ship NXT:2000i and higher DUV lithography equipment to China.

• ASML typically trades at a premium valuation. Although its forward PE ratio has declined from a recent high of 46.3x to 36.07x, it remains relatively expensive compared to its 5-year average of 33.75x.

• Investors seeking exposure to ASML can consider semiconductor ETFs, where ASML holds a weighting of 3.65% and 4.81% in SOXX $iShares Semiconductor ETF(SOXX)$ and SMH $VanEck Semiconductor ETF(SMH)$ ETF, respectively.

• According to technical analysis, ASML's downtrend is expected to pause around the Fibonacci support level at USD852.45. Other support levels based on Fibonacci Retracement are USD726.32, USD624.38, and USD522.43.

Source: Bloomberg, Tiger Brokers, 21 Apr 2024

Source: Tiger PC App