TLDR
- ASML stock is down about 7% since late July after reports China was mass producing DUV lithography machines
- UBS analyst raised his price target to €2,350, implying 55% upside and a potential $1 trillion market cap
- UBS says China is unlikely to develop EUV technology within the next 10 years
- ASML reported quarterly revenue of $10.62 billion and earnings of $8.65 per share
- Consensus analyst rating is “Moderate Buy” with an average price target of $1,970.33
ASML stock was trading at $1,679.27 on Tuesday, down around 1% on the day, as the stock continues to feel the pressure from China competition fears.
The stock has dropped about 7% since late July, when reports surfaced that an unnamed Chinese company was mass producing deep ultraviolet (DUV) lithography machines.
DUV tools are used in chip manufacturing but are a step behind ASML’s more advanced extreme ultraviolet (EUV) machines. The news was enough to shake investor confidence.
UBS analyst Francois-Xavier Bouvignies is not buying the fear. He just raised his price target on ASML from €2,250 to €2,350, which would imply a 55% upside from current levels.
That target would also make ASML the first European company to reach a $1 trillion market valuation. Right now, its market cap sits at around $667 billion.
Bouvignies argues the China threat is being overblown. Looking at patent filings, he believes China is roughly at the same stage ASML was back in 2004 when it comes to EUV development.
“Our base case continues to be that China won’t achieve an EUV tool within the next 10 years,” he wrote in a research note.
He also noted that even if Chinese tools improve, gaps in yield and throughput, along with regulatory constraints, make it unlikely those tools will be used outside China.
What’s Driving the Bull Case
Beyond the China narrative, Bouvignies sees a strong earnings growth story. He forecasts ASML can achieve a 31% compound annual growth rate in earnings per share through 2030, reaching €92.90 per share by the end of the decade.
The drivers include wider use of its machines, higher pricing, and rising demand from memory-chip makers.
On valuation, ASML trades at around 30 times forward earnings. That looks pricier than Nvidia at 17 times, but Bouvignies says it’s actually cheap for ASML.
He points out ASML currently trades at just a 1% premium to U.S. chipmaking equipment peers like Lam Research, KLA, and Applied Materials. Historically, that premium has averaged 67% over the past 15 years.
“Given ASML’s monopoly position and structurally stronger competitive profile, we believe such a discount is difficult to justify,” he wrote.
Analyst Sentiment Stays Positive
The broader analyst community remains constructive. ASML carries a consensus “Moderate Buy” rating with an average price target of $1,970.33.
JPMorgan recently raised its target to $2,400 with an “overweight” rating. Barclays and Deutsche Bank both hold “overweight” and “buy” ratings respectively. Jefferies sits at “neutral.”
Of the analysts covering the stock, four have issued Strong Buy ratings, 21 have Buy ratings, four are at Hold, and three have Sell ratings.
On the institutional side, Ancora Advisors cut its ASML position by 15% in Q2, selling 1,464 shares and retaining 8,264 worth around $16.4 million.
ASML’s 52-week range sits between $716.20 and $1,999.96, and its 50-day moving average is $1,760.29.
The company’s most recent quarterly dividend was $2.1507 per share, paid on August 5th, representing a 0.5% yield.
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