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On Wednesday, Raymond (NSE:RYMD) James analyst Srini Pajjuri reaffirmed a Strong Buy rating on ASML Inc. (NASDAQ:ASML), with a price target of $900.00. Pajjuri’s endorsement came after ASML reported fourth-quarter results for 2024 and provided an outlook for the first quarter of 2025 that surpassed consensus expectations, largely due to significant growth in their Services sector. With a market capitalization of $281 billion and an impressive gross profit margin of 51%, ASML maintains its position as a dominant player in the semiconductor industry. InvestingPro data reveals 13 key insights about ASML’s performance, including its strong financial health score and consistent dividend payments for 18 consecutive years.
ASML experienced a sharp increase in bookings, which surged by 170% quarter-over-quarter to €7.1 billion, with orders for Extreme Ultraviolet (EUV) lithography systems reaching €3 billion. This performance exceeded the expectations set by Raymond James. Pajjuri noted that despite the robust start to the year, ASML’s management chose to maintain its revenue and margin outlook for 2025, which he believes may be conservative. The projection holds steady even with the strong demand for advanced logic and DRAM, as well as the normalization of lead times. According to InvestingPro analysis, ASML maintains a healthy current ratio of 1.55 and operates with moderate debt levels, suggesting strong operational efficiency. Get access to the comprehensive Pro Research Report for deeper insights into ASML’s financial strength and growth potential.
The analyst also highlighted that the share of system sales in China dropped to 27% in the fourth quarter of 2024 from 47% in the third quarter, which could mitigate concerns about potential additional export controls. Moreover, ASML’s management reiterated its expectation that 2026 would be another year of growth.
Looking forward, Pajjuri mentioned that concerns around the demand for AI silicon were not significant. The continued need for large-scale GPU/XPU clusters is evident, despite the development of more efficient models like DeepSeek. In light of these factors, Raymond James has raised its estimates for ASML.
At approximately 28 times the estimated earnings per share for the calendar year 2025, ASML’s valuation stands at a discount when compared to its five-year average of around 35 times. The Strong Buy rating is supported by ASML’s dominance in EUV technology, the potential for double-digit secular growth, and a track record of solid margin execution. Based on InvestingPro Fair Value calculations, the stock appears slightly overvalued at current levels, though analyst targets suggest up to 25% potential upside. The company’s return on equity stands at an impressive 49%, demonstrating strong operational efficiency and management effectiveness.
In other recent news, ASML Holding NV (AS:ASML) has been garnering attention with its CEO, Christophe Fouquet, expressing optimism over the market disturbance caused by DeepSeek’s low-priced chatbot. Fouquet views this development as an opportunity for ASML, foreseeing an increase in market players and boosted demand for ASML’s chipmaking machines. In financial news, Bernstein analysts have maintained an Outperform rating on ASML stock and raised their price target to €850. BofA Securities also affirmed their Buy rating on ASML shares, steady at a EUR803 target. Furthermore, Cantor Fitzgerald maintained its neutral stance on ASML with a $900 price target. These recent developments reflect analysts’ varying confidence in ASML’s ongoing growth trajectory.
ASML’s financial performance has been robust, with fourth-quarter results surpassing consensus estimates, revenues exceeding expectations by 2.5%, and earnings per share by 3%. The company’s bookings for the quarter were notably strong at €7.1 billion, a significant increase from the previous quarter and well above the consensus estimate. ASML’s memory segment orders saw a 91% increase from the previous quarter, while logic orders surged by 265% sequentially.
ASML has provided an optimistic sales guidance of €7.75 billion for the first quarter of 2025, surpassing the consensus of €7.25 billion. However, BofA Securities revised ASML’s price target downwards to €803, reflecting a cautious stance towards the company’s future revenue and earnings projections. Despite this, BNP Paribas (OTC:BNPQY) Exane reinstated coverage on ASML with an Outperform rating and a price target of EUR 817.00. These are the recent developments in ASML’s financial trajectory.
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