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With the company projected to record an exemplary top and bottom-line expansion at a CAGR of 18.2% and 28% through the economic downturn in 2025, the optimism embedded in its valuations is unsurprising, compared to the normalized CAGR of 20.9% and 26.6% between FY2019 and FY2022. Otherwise, it is nearly in line with its 1Y mean of 8.69x and 32.13x, respectively. So, Is ASML Stock A Buy, Sell, or Hold?ĪSML is currently trading at an EV/NTM Revenue of 8.85x and NTM P/E of 32.02x, higher than its 3Y pre-pandemic mean of 6.33x and 26.78x, respectively. Therefore, we believe the moderation in ASML's backlog is only temporary, attributed to the peak recessionary fears and volatile geopolitical issues, with demand likely rebounding once these headwinds lift, possibly by 2025. In addition, the long-term demand for semiconductor chips will not wane, attributed to the sustained cadence towards IoT and data center post-pandemic, significantly aided by the recent AI boom and sustained decarbonization progress through EVs and renewable energies through 2050. We will just follow where our customers are moving. (Around 38% of NXP's sales are to Chinese manufacturers, about half of which are processed and then re-exported to Western buyers.) A lot of that going forward could eventually move out of China, which doesn't harm us.

What I think for our industry is sometimes hard to deal with is there doesn't seem to be a clear roadmap on what to expect going forward. The list includes government incentives from the CHIPS Act in the US and the EU, refundable investment tax credits, and Semiconductor Co-Investment Program with Brookfield Asset Management.Ĭombined with ASML's expanded total backlog of €39B by FQ1'23 (-3.4% QoQ and +34.4% YoY), we believe its intermediate-term prospects remain more than excellent, since it is 'almost 2x this year's system sales.'įurthermore, headwinds from China likely pose little risks, with demand likely to be diverted to other locations, as similarly highlighted by NXP Semiconductors ( NXPI) in the recent Bloomberg New Economy conference. However, orders from Intel Corporation ( INTC) may remain intact, attributed to its ability in recapturing some of its ongoing capital expenditure through Smart Capital. These likely comprise part of ASML's reduced net bookings of €3.8B in FQ1'23 ( -39.6% QoQ and -45.7% YoY), comprising only 21% (-15 points QoQ and -13 YoY) for memory systems. The same cadence has been observed with memory chipmakers, such as Micron Technology ( MU) and Samsung ( OTCPK:SSNLF), where capital expenditures and production cuts have been announced. Meanwhile, the DUV and EUV maker may have been hit by the semiconductor demand destruction, with the world's largest foundry, Taiwan Semiconductor Manufacturing Company Limited ( TSM), potentially canceling or delaying 40% of its EUV shipment.

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Therefore, depending on how the actual ban is shaped, whether only comprising its newest tech EUV or including the mature Deep UV systems, we believe the impact on the company's top/ bottom line and the global semi-supply chain may be more impactful than expected.įor now, ASML highlights that most of the Chinese backlogs remain trade export compliant, with orders reverting to the older 1980s Deep UV series, instead of the 2050s or 2100s series to avoid 'being blocked.' This strategy may potentially preserve its sales in the intermediate term, if stricter rules are not imposed. It is important to note that these lithography systems are used to manufacture semiconductor chips in the mid-critical and mature end-markets, such as EVs, renewable energy, and industrial products, amongst others.

ĪSML now projects that up to 20% of its backlog is attributed to China, comprising up to 50% of its Deep UV systems. The latter of which we have previously covered in our previous article here. ( NASDAQ: ASML) is the latest semiconductor supply chain company to be impacted by the economic downturn, the resultant demand destruction, and the volatile geopolitical issues between the US and China. LilliDay The Economic Downturn Is Only Temporary - ASML's Dominance Remains UnchallengedĪSML Holding N.V.

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