January 27, 2025
ASML Holding N.V. ASML is slated to report fourth-quarter 2024 results on Jan. 29.
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ASML expects revenues between €8.8 billion and €9.2 billion. The Zacks Consensus Estimate is pegged at $9.76 billion, indicating an increase of 25.3% from the year-ago quarter’s level.
The Zacks Consensus Estimate for earnings is pegged at $7.18 per share, up 28.2% from the year-ago quarter’s earnings of $5.60. The estimate has been revised downward by a penny over the past seven days.
ASML Holding has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 12.7%.
ASML Holding N.V. price-eps-surprise | ASML Holding N.V. Quote
Our proven model does not conclusively predict an earnings beat for ASML Holding this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here .
ASML carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -3.14% at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
The semiconductor sector is riding a wave of resurgence, fueled by surging demand and the transformative potential of AI. This positive momentum has been a boon for companies like ASML, particularly in the wafer fabrication equipment space.
ASML has been at the forefront of technological innovation, benefiting significantly from the industry’s shift toward smaller, more advanced technology nodes. These nodes are essential for building cutting-edge digital infrastructures supporting AI, 5G and high-performance computing. The increasing complexity of chip designs has made ASML's state-of-the-art lithography tools indispensable to chipmakers.
In both the logic and memory markets, demand for ASML’s lithography tools continues to climb. The ongoing transition to next-generation memory technologies, such as DDR5 and high-bandwidth memory (HBM), is a tailwind for the company. With DRAM manufacturers ramping up technology upgrades, ASML is likely to have witnessed strong momentum in the fourth quarter, driven by heightened memory demand.
ASML’s heavy investments in Extreme Ultraviolet (“EUV”) technology are also paying off. EUV lithography is critical for producing advanced chips, and the company’s service segment is benefiting from the rising demand for EUV-related services. In particular, the growing popularity of the NXE:3800 low numerical aperture (NA) machine, which can process 220 wafers per hour, has likely driven substantial EUV sales in the to-be-reported quarter.
Despite the strengths, macroeconomic challenges are likely to have negatively impacted ASML’s quarterly outlook. The intensifying U.S.-China trade tensions, coupled with export restrictions on advanced semiconductors and equipment to China, remain a critical headwind. Given ASML’s exposure to the Chinese market, these restrictions may have dampened the company’s overall performance.
ASML Holding shares have plunged 17% over the past year, underperforming the Zacks Semiconductor Equipment - Wafer Fabrication industry’s decline 16.7%. Comparing ASML with semiconductor peers, the stock has underperformed Broadcom AVGO, Marvell Technology MRVL and Micron Technology MU.
Now let’s look at the value that ASML offers to its investors at the current level. Currently, ASML is trading at a premium. With a forward 12-month P/E of 28.61X, ASML is trading almost in line with the industry.
While ASML’s EUV technology cements its position as an industry leader, the associated costs are proving burdensome. The company’s third-quarter shipment of two High NA EUV systems underscores its commitment to innovation, but these systems’ steep production expenses have strained profitability.
Management has acknowledged a 3.5% margin dilution in the fourth quarter due to ramp-up costs for High NA EUV production. This trend is expected to persist, as scaling this technology for commercial adoption is likely to pressure margins in the foreseeable future. While the long-term potential remains undeniable, the near-term financial strain cannot be ignored.
Geopolitical tensions pose a substantial threat to ASML Holding’s revenue streams. With China accounting for 47% of ASML’s lithography shipments in the third quarter of 2024, escalating U.S. export restrictions could significantly impact sales from this critical market. Any disruption in China’s demand would hurt the company’s financial performance.
Meanwhile, macroeconomic challenges such as inflation and a sluggish recovery in mobile and PC markets compound ASML’s woes. These factors highlight the cyclical nature of the semiconductor industry, which is still contending with post-pandemic demand volatility.
A cautious approach may be suitable for those wondering how to play ASML stock ahead of the fourth-quarter 2024 earnings report. ASML Holding’s long-term leadership in semiconductor technology is undeniable, but the stock’s near-term challenges are too significant to ignore. Weaker guidance, profitability pressures, geopolitical risks and macroeconomic headwinds weigh heavily on the company’s immediate prospects.
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