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ASML Maintains Lofty Lithography Sales Growth Outlook for 2021; Raising FVE to $715 (EUR 607)

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

ASML reported solid third-quarter results, with revenue at the low end of management’s guidance but consistent with our expectations. Although its fourth-quarter guidance was negatively impacted by materials shortages in the supply chain (with some sales pushed to the first quarter of 2022), we expect ASML to grow its revenue by 35% in 2021 and ship its full EUV production capacity of 55 systems in 2022. Furthermore, we are raising our long-term gross margin assumptions and we now expect ASML to reach the high end of its 2025 revenue target range of EUR 24 billion to EUR 30 billion. Consequently, we are raising our fair value estimate for ASML to $715 per share from $635 (and EUR 607 per share from EUR 527). Shares were down nearly 5% due to the weak guidance but are still modestly overvalued. We would be avid buyers on any further pullback in this wide-moat lithography leader.

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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 require next-generation EUV lithography tools from ASML to continue past the 5-nanometer process node. ASML's products are used at every major semiconductor manufacturer, including Intel, Samsung, and TSMC.

De Run 6501
Veldhoven, NB, 5504 DR, Netherlands
T +31 402683000
Sector Technology
Industry Semiconductor Equipment & Materials
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 30,684