Where Will ASML Be in 5 Years?

ASML's Market Position and Valuation - ASML holds a monopoly on EUV technology, essential for producing advanced logic chips and high-bandwidth DRAM memory [1][2] - Despite a 40% stock pullback from July highs and a 10.5% decline year-to-date, ASML's valuation remains premium at 36 times trailing earnings [2][3] - The recent pullback was driven by weak orders as customers adopted a cautious investment stance for 2025, though overall spending on ASML machines is expected to grow [3] Financial Performance and Growth - ASML's gross margins surged from mid-40% in 2019 to low-50% by 2021 due to EUV adoption, with EUV systems now making up 42% of system sales [5][6] - Revenue grew at a 16.9% annualized rate between 2014 and 2024, with EPS growing at 22% and EUV sales growing at 34.8% annually from 2019 to 2023 [7] - Management projects continued growth and margin expansion as EUV becomes a larger portion of revenue and profits [8][13] EUV Technology and Future Prospects - EUV is critical for semiconductors at 7nm and below, with high-NA EUV machines offering higher resolution and cost efficiency [9][10] - ASML has begun shipping high-NA machines, which cost up to $380 million, and plans to introduce hyper-NA machines between 2030 and 2035 [9][11] - High-NA adoption is expected to drive further profit growth as competitors race to implement the technology [11] 2030 Financial Targets - ASML provided low, medium, and high estimates for 2030 revenue (€44B, €52B, €60B) and gross margins (56%, 58%, 60%) [12][13][14] - Implied annualized revenue growth from 2024 ranges from 7.8% to 13.5%, with operating income projected between €16.9B and €27.5B [14] - ASML's current market cap of €251B is 17.8x, 13.7x, and 11.0x the low, mid, and high-end 2030 earnings scenarios [14] Long-Term Investment Outlook - ASML's valuation appears cheap based on 2030 projections, with potential for share count reduction through repurchases [15] - The company's ability to maintain a high P/E ratio in 2030 will depend on continued growth prospects and competitive advantages [16][17] - ASML's monopoly on EUV technology and future innovations like hyper-NA machines support its long-term growth potential [17][18]