ASML Earnings: Strong Bookings of EUR 9.2 Billion Indicate a Healthy 2025, but 2024 Looks Flat

Wide-moat ASML's quarterly results surprised investors as it recorded very strong bookings of EUR 9.2 billion, sending the shares up 6% intraday. This comes after weaker bookings during the first nine months of 2023 (EUR 10.9 billion cumulatively) as foundries moderated their tool orders given the overall macroeconomic slowdown. We expect healthy orders through 2024 due to: (1) strong fab openings expected in 2025 (Taiwan Semiconductor Manufacturing, Intel, and Samsung), and (2) strong demand from Chinese customers in anticipation of further export restriction controls. Revenue from China has seen a fourfold increase in the past two quarters and we expect Chinese demand will remain high through 2024 for the same reason. Revenue and EBIT grew 30% and 39%, respectively, to EUR 27.6 and EUR 9.0 billion for the full year. We expect only slight sales growth in 2024, in line with management’s comments, followed by double-digit growth of almost 20% in 2025, with revenue reaching EUR 34.2 billion compared with management’s guidance of EUR 30 billion to EUR 40 billion. We maintain our EUR 700 fair value estimate, with shares trading in EUR 750 territory after the Jan. 24 results, representing a 33 times enterprise value/EBIT (2023) multiple.