On Wednesday, BofA Securities adjusted its outlook on ASML Holding NV (AS:ASML), a key supplier in the semiconductor industry. The firm's analyst revised the price target downward to €870.00 from the previous €1,064.00, while still maintaining a Buy rating on the stock.
This change follows ASML's recent guidance update, which suggests a reduction in expected revenue and gross margins (GM) for the calendar year 2025.
ASML's guidance revision is primarily due to several factors impacting its business. The company anticipates shipping fewer EUV low-NA systems—47 units as opposed to the previously expected 69.
This decrease is likely a result of delayed orders from major clients, including Intel (NASDAQ:INTC), Samsung (KS:005930) Foundry, and potentially a reduced build of TSMC's 2nm capacity in 2025. The analyst estimates that approximately 70-75k wafer starts per month (wspm) of logic capacity have been postponed.
Another significant factor in the revised guidance is the projected decline in revenues from China. ASML expects Chinese sales to drop to 20% of its total sales next year, which indicates a year-over-year revenue decline of 48%. This figure is notably more drastic than the 3% decline previously projected by analysts. However, this is partially offset by an anticipated 69% year-over-year increase in non-China sales.
The company's gross margin forecast has also been reset to a range of 51-53%, compared to the prior estimate of 54-56%. This adjustment is due to a less favorable product mix, including fewer shipments of the higher-margin 3800E tool, and a lower proportion of sales from China, which is typically a higher GM region.
Furthermore, ASML is facing increased operating expenses (OPEX), guiding for €6.1 billion next year as opposed to the prior consensus of around €5.85 billion. This rise in OPEX is expected to exert additional pressure on the company's earnings per share (EPS). It is important to note that US export controls were not mentioned as a contributing factor by ASML.
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