ASML Holding Stock: Worth The Hype?

Jul. 12, 2023 9:00 AM ET ASML Holding N.V. (ASML), ASMLF

Summary

• ASML Holding is up 80% since what appeared to be its short-term lows in October.
• Does this meteoric rise mean the company is now expensive? Or was it too cheap back then?
• We revisit ASML’s valuation from three angles to reach a conclusion.
• This idea was discussed in more depth with members of my private investing community, Best Anchor Stocks. Learn More??

Introduction

ASML Holding is a Dutch multinational corporation that manufactures lithography systems, which are used to manufacture semiconductors. The company is the world’s leading supplier of lithography systems, and its products are essential for the production of the latest generation of chips.

In recent years, ASML has benefited from strong demand for its products. The global semiconductor market is expected to grow at a compound annual growth rate (CAGR) of 8% from 2022 to 2026. This growth is being driven by the increasing demand for smartphones, data centers, and other electronic devices.

ASML’s Products

ASML’s lithography systems are used to create the microscopic patterns on silicon wafers that make up the circuitry of computer chips. The company’s products are essential for the production of the latest generation of chips, which are smaller, denser, and more power-efficient than ever before.

ASML’s lithography systems are divided into two main categories:

• Deep ultraviolet (DUV) lithography systems: These systems are used to produce the first few layers of circuitry on a silicon wafer.
• Extreme ultraviolet (EUV) lithography systems: These systems are used to produce the last few layers of circuitry on a silicon wafer. EUV lithography systems are the most advanced lithography systems available, and they are essential for the production of the smallest and most powerful chips.

ASML’s Market Position

ASML is the world’s leading supplier of lithography systems. The company has a dominant market share, and it is the only supplier of EUV lithography systems. This gives ASML a significant competitive advantage, and it allows the company to charge premium prices for its products.

ASML’s Growth Prospects

The global semiconductor market is expected to grow at a CAGR of 8% from 2022 to 2026. This growth is being driven by the increasing demand for smartphones, data centers, and other electronic devices. ASML is well-positioned to benefit from this growth, as its products are essential for the production of the latest generation of chips.

ASML’s Risks

ASML faces some risks, such as the potential for a slowdown in the semiconductor market. However, the company’s long-term growth prospects outweigh these risks.

Conclusion

ASML is a good investment for investors who are looking for exposure to the growing semiconductor market. The company has a strong growth outlook, and it is well-positioned to benefit from the increasing demand for semiconductors.

Additional Key Points

• ASML’s lithography systems are essential for the production of the latest generation of chips.
• The global semiconductor market is expected to grow at a CAGR of 8% from 2022 to 2026.
• ASML’s stock price has risen sharply in recent years, but the company is still trading at a premium to its peers.
• ASML faces some risks, such as the potential for a slowdown in the semiconductor market.
• However, the author believes that ASML’s long-term growth prospects outweigh these risks.

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