ASML Holding Soars to New Targets with Upgraded Buy Rating from BofA

Didier Scemama, an analyst at BofA Securities, is signalling strong confidence in ASML Holding N.V., reiterating a Buy rating and elevating the price target from 1,156 euros ($1,213) to 1,302 euros ($1,406), indicating a bullish outlook for the semiconductor equipment manufacturer.

ASML's Increased Revenue and EPS Forecasts

Scemama has adjusted his estimates for ASML's revenue and earnings per share (EPS) for the years 2025 and 2026 upward by 6%-9%, due to a growing demand for Extreme Ultraviolet (EUV) technology tools and an anticipatory increase in gross margins to 54.9% from the prior 54.7%. His updated revenue and EPS projections now stand 10%-7% and 15%-9% above market consensus, respectively, showcasing a positive deviation from the market's expectations.

Rationale Behind ASML's Rising Price Target

The alteration in ASML's price target takes into account sector-wide multiple expansion and the critical nature of AI in Europe, with ASML being deemed the top choice within the EU Semiconductor Capital Equipment (Semicaps) sector. ASML's indispensable position in powering AI infrastructure is highlighted by the fact that all AI processor and DRAM manufacturers use ASML's EUV technology to produce their chips.

Despite certain concerns about orders from foundries till the end of the current year, Scemama is sanguine that the investment surge by leading hyperscalers and enterprise customers into AI infrastructures implies an unquestionable need for substantial capacity enhancements at the forefront of technology.

On the note of capacity, it's worth mentioning that as per Lam Research Corp (LRCX), an AI server requires DRAM content eight times that of a traditional enterprise server, and logic content is quadrupled, with NAND content needing three to four times more. Scemama has, therefore, increased his forecast for 2024 bookings from €10.3 billion to €10.7 billion, predicting 80 EUV unit shipments in 2025.

Scemama also anticipates litho intensity—defined as the proportion of semiconductor production steps that involve lithography—during 2023 and 2024 to be around 25%-26%, surpassing the historical average of 22%, due to the increased complexity introduced by leading-edge technology, including EUV.

Market Reaction to ASML's Forecast

Following these announcements, ASML's shares saw a dip of 2% to trade at $1,031.53 recently. However, the projected growth and raised targets suggest a robust trajectory ahead for the company in the burgeoning field of high technology manufacturing.

ASML, EUV, AI