Raymond James has adjusted its outlook on ASML Inc. (NASDAQ: ASML), a leading supplier of semiconductor manufacturing equipment, by reducing its price target to $1,100 from the previous $1,300. Despite the price target reduction, the firm maintained a Strong Buy rating on the stock.
The revision follows a careful evaluation of ASML's near-term quarterly bookings and its 2025 financial targets. The analyst highlighted that for ASML to meet the midpoint of its 2025 targets, it would require an average of less than €3.5 billion in orders for the next two quarters. This is in light of the fact that the company's bookings have averaged €6.2 billion per quarter over the last three years, with a range between €2.6 billion and €9.2 billion.
The analyst anticipates that a mix of DRAM expansions, additional 2nm Foundry orders, and the establishment of new fabrication plants will contribute to robust Extreme Ultraviolet (EUV) lithography orders in the second half of 2024. This demand is expected to help ASML achieve its future revenue goals.
In other recent news, ASML Holding NV (AS:ASML) has been the subject of several analyst revisions due to potential headwinds in the semiconductor capital equipment sector. Morgan Stanley adjusted its stance on ASML stock, shifting the rating from Overweight to Equalweight and reducing the price target.
The investment firm cited a possible spending slowdown impacting earnings growth for ASML in the years 2025 and 2026. Deutsche Bank also adjusted its price target for ASML, citing a predicted 22% decline in China sales by 2025 due to challenges in the semiconductor market. Despite this, Deutsche Bank maintained its Buy rating.
BofA Securities revised its price target on ASML shares, reducing it due to lowered earnings projections for 2025 and 2026, but also maintained a Buy rating. Citi has revised its price target for ASML, reducing it while maintaining a Buy rating.
This adjustment was influenced by a slower industry cycle and reduced capital expenditure forecasts from Intel (NASDAQ:INTC). Meanwhile, UBS downgraded ASML's stock from Buy to Neutral, and Barclays upgraded it from Equal Weight to Overweight. These adjustments were in response to recent developments, including increased export controls on ASML's chipmaking equipment by the Netherlands, and dissatisfaction expressed by China towards these controls.
InvestingPro Insights
ASML's financial metrics and market position align with Raymond James' optimistic outlook. According to InvestingPro data, ASML boasts a substantial market capitalization of $339.16 billion, underscoring its dominant position in the semiconductor industry. The company's robust financial health is evident in its impressive gross profit margin of 51.44% for the last twelve months as of Q2 2024, indicating strong pricing power and operational efficiency.
InvestingPro Tips highlight ASML as a "Prominent player in the Semiconductors & Semiconductor Equipment industry," which supports Raymond James' confidence in the company's ability to capitalize on future demand for EUV lithography. Additionally, ASML has "maintained dividend payments for 18 consecutive years," demonstrating financial stability and commitment to shareholder returns.
While the P/E ratio of 46.03 suggests a premium valuation, it may be justified by ASML's market leadership and growth prospects. Investors seeking more comprehensive analysis can access 12 additional InvestingPro Tips, offering deeper insights into ASML's financial health and market position.
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