On Wednesday, Wolfe Research maintained a positive outlook on ASML Holding NV (AS:ASML:NA) (NASDAQ: ASML), reiterating an Outperform rating and a price target of EUR 1,050.00. This affirmation comes despite the company's third-quarter revenue guidance falling short of consensus estimates. ASML's guidance indicated a midpoint of €7 billion, compared to the Street's expectation of €7.65 billion.
The shortfall in revenue guidance for the third quarter was attributed to timing issues, with the company suggesting a "significant" revenue improvement in the second half of 2024 compared to the first half. Additionally, the firm upheld its forecast for flat year-over-year revenue, hinting at a robust fourth quarter that could surpass current market predictions.
ASML's solid second-quarter bookings and the maintenance of its full-year 2024 guidance have set the stage for a strong performance in the latter half of 2024 and into 2025. Despite the dip in stock price following the report, Wolfe Research views the third-quarter revenue guidance as a minor concern, considering the company's performance is largely evaluated based on 2025 and 2026 projections.
The company's bookings in the second quarter were notably driven by memory DUV, and there is anticipation for TSMC's N2 EUV orders in the second half, which bolsters confidence in future bookings. Wolfe Research suggests that achieving the high end of the 2025 guidance remains highly probable, given that bookings need only remain flat for the rest of 2024.
Concerns have also arisen over potential additional restrictions from the U.S. government on services related to restricted tools in China. Reports indicate that Washington may use the foreign direct product rule to leverage restrictions on services, although ASML's leading-edge tools are already under restriction.
Wolfe Research's initial reading of the situation indicates that the U.S. aims to limit services rather than impose new restrictions on older immersion tools. Since services in China represent a small portion of ASML's revenue, the firm advises that these concerns should not significantly impact the company's financial outlook.
Investors are awaiting further clarification, which is expected to be provided during ASML's conference call scheduled for 9 a.m. ET. Wolfe Research's initial reaction to the morning's stock price decline is to consider it an opportunity to buy.
In other recent news, ASML, a key player in the semiconductor industry, experienced a dip in its share value due to a less than expected third-quarter sales forecast, impacting the broader tech sector.
On a brighter note, ASML is anticipated to report an increase in new orders in its second-quarter earnings, thanks to a surge in demand for AI chips. Analysts from Mizuho predict the value of orders received could reach nearly €5 billion in the second quarter, surpassing consensus estimates.
In the lead up to ASML's earnings release, Cantor expressed a positive outlook for the company, anticipating a potential modest beat and raise in the report. Investors are also closely monitoring the company's bookings, as management indicated that approximately €4 billion per quarter is required to meet the mid-point of their CY25 target model.
ASML's shares recently reached an all-time high, driven by growing optimism about the prospects of its top customer, Taiwan Semiconductor Manufacturing Company (TSMC). This milestone has further cemented ASML's position as Europe's third most valuable company, with a market capitalization of 390 billion euros.
Meanwhile, former ASML CEO, Peter Wennink, shared insights on the ongoing US-China chip dispute, predicting its persistence due to its ideological nature.
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