Analyst Note| Abhinav Davuluri, CFA |
ASML reported fourth-quarter results ahead of our expectations and above the high end of management’s guidance, thanks to higher system revenue. Despite uncertainty regarding Intel’s manufacturing plans, TSMC has seemingly picked up the slack with a 2021 capital expenditure budget of $25 billion-$28 billion. Consequently, ASML CEO Peter Wennink expects combined logic and foundry revenue to be up at least 10% in 2021. Wennink anticipates ASML’s memory revenue to be up 20% in 2021, primarily due to a recovery in DRAM spending. After revising our wafer fab equipment estimates for 2021 and taking into account ASML’s rosy outlook, we are raising our fair value estimate for the wide-moat company to $500 per share from $365 (and EUR 415 per share from EUR 310), as industry adoption of extreme ultraviolet lithography is set to accelerate this year and beyond.