On Monday, Bernstein SocGen Group adjusted its stance on ASML Holding NV (AS:ASML:NA) (NASDAQ: ASML), reducing its price target from €980.00 to €750.00. Despite the reduction, the firm maintained its Outperform rating on the stock. The analyst cited a challenging outlook for 2025, with the company now guiding for revenues of €32.5 billion.
The forecast includes expectations for improved business with IBM (NYSE:IBM) but acknowledges that Extreme Ultraviolet (EUV) lithography volumes are falling short of expectations. Additionally, ASML anticipates that China will account for approximately 20% of its 2025 revenues, a conservative estimate that takes into account the risk of potential further restrictions in the region.
The analyst believes there is potential for upside due to a bullish view on the sustained demand for wafer fabrication equipment (WFE) in China, although this could be tempered by a recent overreliance on lithography.
Consequently, the firm has significantly reduced its estimates for ASML's top-line revenue and margins, now projecting a 2025 revenue of €31.8 billion and a gross margin of 52%, leading to an earnings per share (EPS) of €23.8.
Despite the current low visibility in the market, Bernstein SocGen Group anticipates a recovery for ASML in 2026. The analyst noted that ASML's recent devaluation has been more pronounced compared to historical trends, with the company's shares trading at a trough multiple that is one standard deviation below the historical average.
This valuation is deemed excessive by the firm, especially considering that ASML is currently trading at a discount to the Semiconductor Index (SOX), which the analyst finds unwarranted given the strong structural story still attributed to ASML.
In other recent news, ASML Holding NV has experienced several adjustments to its stock price target by various firms. Citi revised the company's price target to €930 from €1,150, Deutsche Bank reduced it to €825 from €950, while Cantor Fitzgerald adjusted it to €750 from €1,000.
Despite these changes, all three firms maintained a positive rating on the stock. BofA Securities reaffirmed its buy rating and a price target of €870, citing anticipated higher revenues from IBM.
ASML has revised its 2025 revenue forecast due to a slower recovery in traditional markets and normalization of China sales. The company's Q3 2024 results revealed total net sales of €7.5 billion and a gross margin of 50.8%. Projections for Q4 2024 net sales are estimated to be between €8.8 billion and €9.2 billion.
These are recent developments in ASML's financial trajectory. Analysts from various firms, including JPMorgan and BofA Securities, express confidence in ASML's ability to navigate these changes, anticipating growth in non-China deep ultraviolet revenues and expecting extreme ultraviolet revenues to increase by 41% next year.
InvestingPro Insights
Recent InvestingPro data provides additional context to Bernstein SocGen Group's analysis of ASML Holding NV. Despite the reduced price target, ASML's market capitalization remains robust at $286.18 billion, underscoring its significant position in the semiconductor industry. The company's P/E ratio of 38.08 aligns with the analyst's observation of a recent devaluation, suggesting a potential opportunity for investors who believe in ASML's long-term prospects.
InvestingPro Tips highlight that ASML is a "prominent player in the Semiconductors & Semiconductor Equipment industry," which supports the analyst's view on the company's structural strength. Additionally, the tip noting that "6 analysts have revised their earnings upwards for the upcoming period" indicates that some market observers remain optimistic about ASML's near-term performance, despite the challenges outlined in the article.
The company's financial health appears solid, with InvestingPro data showing a gross profit margin of 51.15% for the last twelve months as of Q3 2024, closely aligning with Bernstein's projected 52% gross margin for 2025. This consistency in margins suggests ASML's ability to maintain profitability even in a challenging market environment.
For investors seeking more comprehensive insights, InvestingPro offers 14 additional tips on ASML, providing a deeper understanding of the company's financial position and market dynamics.
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