Is ASML Stock the Top Pick in Semiconductors Now?

TL;DR

ASML's stock is currently considered undervalued due to strong demand for its lithography systems, despite facing risks like supply chain issues and geopolitical concerns. The company maintains a high gross margin and a monopoly in EUV systems, indicating strong long-term growth potential in a challenging semiconductor market.

Transcript

hi everyone this victor here welcome to the intelligent investor channel i'm going to give you an updated asmr stock analysis today asml is the leading photo lithography system maker in the world asml is known for making the most advanced steep ultraviolet duv and extreme ultraviolet euv systems this duv and eui lithography systems are used by chip... Read More

Key Insights

• 🇨🇷 ASML's gross margin remains high despite supply chain issues and rising costs, indicating the company's ability to pass on these costs to its customers.
• 😃 The biggest risks for ASML are overcapacity and geopolitical concerns related to restrictions on selling to China.
• 💪 ASML has a strong economic moat, with a monopoly in EUV systems and near monopoly in DUV systems.
• 💗 Demand for ASML's lithography systems is expected to grow due to increasing demand for advanced chips in various industries.
• 💐 ASML's stock is evaluated as undervalued based on the discounted cash flow valuation.
• 🧔 Despite the current bear market in the semiconductor sector, the long-term prospects for ASML remain positive.

Questions & Answers

Q: What are the macro risks affecting ASML's business?

ASML faces supply chain issues, rising costs, and labor shortages due to a tight job market for engineers. High material costs and transportation costs are also impacting the company. However, the impact on ASML's gross margin is expected to be around 1% for the full year 2022.

Q: What is ASML's market share in the lithography systems industry?

ASML has a monopoly in EUV systems, which are crucial for making advanced processor chips. In DUV systems, ASML had a market share of 95% in 2021, making it the dominant player in the market.

Q: What are the long-term prospects for ASML?

ASML's business is expected to continue growing due to increasing demand for its DUV and EUV systems. The company has a large backlog of orders and is supply-constrained, indicating strong customer demand. ASML plans to add more capacity to meet future demand, as the semiconductor industry is expected to double by 2030.

Q: How is ASML's stock valuation calculated?

ASML's intrinsic value can be calculated by discounting its future free cash flows to the present day. The valuation depends on various growth rate assumptions. Under different scenarios, ASML's intrinsic value ranges from approximately $152 per share to $671 per share.

Summary & Key Takeaways

• ASML is facing macro risks such as supply chain issues, labor shortage, rising costs, and high inflation in the semiconductor industry.

• Despite these challenges, ASML's gross margin remains high, with net sales and operating income growing consistently over the years.

• The biggest risks for ASML are overcapacity due to aggressive expansion and geopolitical concerns related to restrictions on selling to China.