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ASML Records Impressive EUV Sales in Q3 Despite Intel 7-Nanometer Delay; Raising FVE to $365

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

ASML reported third-quarter results ahead of our expectations and above the midpoint of management’s guidance, thanks to record quarterly extreme ultraviolet, or EUV, system revenue. A key customer, Intel, will be delaying its 7-nanometer process technology that uses EUV by six to 12 months, which will prevent ASML reaching its EUV shipment target of 35 systems for 2020. That said, management remained optimistic for its EUV prospects and called for at least 20% EUV top-line growth in 2021. We attribute this confidence to TSMC’s successful deployment and ramp of EUV for its 5-nm process, while we assume Samsung will also further incorporate EUV into its logic and DRAM technologies in 2021. We are raising our fair value estimate for wide-moat ASML to $365 per share from $276 (and EUR 310 per share from EUR 249), as industry adoption of EUV is poised to accelerate in the coming years despite Intel’s delay.

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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 Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 26,200