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Economic Moat




ASML Enjoys Rebound in Second-Quarter Revenue Led by Logic and Foundry Demand; Raising FVE to $276

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

ASML reported a strong sequential increase in second-quarter results, as the firm was able to navigate a challenging environment due to the coronavirus pandemic. Although management did not provide guidance during last quarter’s earnings call, it did note that revenue could be up 50% sequentially in the second quarter. Ultimately, revenue rose 36% sequentially as supply issues in the first half of the quarter were mitigated in the second half, though two extreme ultraviolet, or EUV, systems were shipped without revenue recognized (this will occur in the third quarter). Based on management’s upbeat guidance and solid near-term outlook, we are raising our fair value estimate to $276 per share from $245 (and EUR 249 per share from EUR 221). Major logic and foundry customers such as TSMC, Intel, and Samsung are poised to deploy EUV lithography in high-volume manufacturing in 2021 (with some early implementation in 2020), and we are confident in wide-moat ASML to overcome any macroeconomic headwinds. Nonetheless, shares look overvalued after increasing over 90% from mid-March lows.

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Company Profile

Business Description

Founded in 1984 and based in the Netherlands, ASML is a leading manufacturer of photolithography systems used in the manufacturing of semiconductors. Photolithography is the process in which a light source is used to expose circuit patterns from a photomask onto a semiconductor wafer. The latest technological advances in this segment allow chipmakers to continually increase the number of transistors on the same area of silicon, with lithography historically representing a meaningful portion of the cost of making cutting-edge chips. Chipmakers will require next-generation EUV lithography tools that have been in development by ASML to continue past the 10-nanometer process node. ASML's products are used at every major semiconductor manufacturer, including Intel, Samsung, and TSMC.

De Run 6501
Veldhoven, 5504 DR, Netherlands
T +31 402683000
Sector Technology
Industry Semiconductor Equipment & Materials
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 24,282