On Wednesday, Deutsche Bank adjusted its price target for ASML Holding NV (AS:ASML:NA) (NASDAQ: ASML), a leading supplier in the semiconductor industry, to €950 from the previous €1,100. Despite the reduction, the firm maintained its Buy rating on the stock. This change reflects a 14% decrease in the target price and is attributed to a revised earnings per share (EPS) forecast for the company.
The reduction in the price target and EPS forecast is based on recent developments affecting ASML, particularly in China and with one of its major customers, Intel (NASDAQ:INTC). According to Deutsche Bank, there is an observed deterioration in the spending outlook for mainstream semiconductor nodes in China, leading to over-capacity and challenges for newer entities backed by Chinese provinces, which are experiencing issues with yields and funding.
ASML's situation is further complicated by the potential impact of U.S. restrictions on Chinese technology companies. The analyst noted concerns that Chinese DRAM manufacturers, such as CXMT, Wuhan Xinxin, and SwaySure, could be added to the U.S. entity list due to alleged connections with Huawei or as part of the U.S.'s broader strategy to curb China's AI advancements. Such developments could adversely affect ASML's sales in China.
The bank now anticipates a 22% decline in ASML's China sales by the year 2025. This forecast is set against a backdrop of weakening demand not only in the analog and power sectors but also in mainstream foundries that depend on low-margin production to maintain capacity.
Deutsche Bank's revised EPS estimates for ASML now stand at 15% and 7% below the previous consensus for the fiscal years 2025 and 2026, respectively. This adjustment indicates a more cautious outlook for ASML's financial performance in the coming years, taking into account the current and potential challenges in the semiconductor market.
In other recent news, ASML is facing increased export controls on its chipmaking equipment by the Netherlands, a decision that aligns with the United States' export restrictions and has drawn criticism from China.
This could impact ASML's business with China, potentially affecting the company's earnings and revenue. BofA Securities has revised its price target on ASML shares, reducing it due to lowered earnings projections for 2025 and 2026.
Despite the adjustment, the firm maintains a Buy rating on the stock. Morgan Stanley also adjusted its price target for ASML, maintaining an Overweight rating, while UBS downgraded ASML's stock from Buy to Neutral. Barclays, however, upgraded ASML's stock from Equalweight to Overweight.
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