Is ASML Stock a Buy?

Core Viewpoint - ASML, a leader in the semiconductor industry, is facing challenges due to weak demand in China and export restrictions from the U.S., but it maintains a significant competitive advantage with its EUV technology, which is crucial for advanced chip production in the AI era [2][3][4]. Current Position of ASML - ASML's stock has underperformed in 2023, down 5% year-to-date, contrasting with peers like Taiwan Semiconductor Manufacturing [2]. - The company cut its 2025 revenue guidance due to a normalization of China revenue, expected to drop to about 20% of total revenue from nearly 50% in 2024 [3]. - ASML's business is cyclical, with only about 100 machines sold quarterly, making it sensitive to industry downturns [3]. - The company reported weak booking results, with only 2.6 billion euros in new orders, indicating potential future demand issues [3]. Financial Performance - Despite challenges, ASML achieved a 12% year-over-year revenue growth in Q3, reaching 7.47 billion euros, and increased earnings per share from 4.81 to 5.28 euros [4]. - The company forecasts revenue of 30 billion to 35 billion euros in 2025 and 44 billion to 60 billion euros by 2030, driven by the growth in AI and semiconductor demand [4]. Competitive Advantage - ASML is the sole manufacturer of EUV lithography machines, which are essential for producing advanced chips, positioning the company favorably in the semiconductor market [4]. - The global semiconductor sales are projected to exceed $1 trillion by 2030, indicating a compound annual growth rate of 9% [4]. - ASML expects double-digit growth in EUV lithography through 2030, enhancing its market position [6]. Investment Consideration - The stock trades at a price-to-earnings ratio of 39, with expectations of expanding margins, forecasting a gross margin of 51% to 53% next year and 56% to 60% by 2030 [6]. - Despite a challenging 2024, ASML's competitive advantages and the anticipated growth in AI and semiconductor foundries suggest it could be a smart buy at current valuations [6].