"A bit hyped": The buzz on ASML before the numbers
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"A BIT HYPED": THE BUZZ ON ASML BEFORE THE NUMBERS
ASML ASML.AS kicks off the reporting season for European tech on Wednesday, as optimism around earnings at Europe's second largest company is running high, and an AI-driven rally on both sides of the Atlantic reaches new peaks.
Bulls seem to be in control but there are also a few signs of caution, meaning that numbers from the Dutch group could test the market's resolve to push the rally further.
In Amsterdam .AEX, ASML has breached 1000 euros for the first time in the run up to its earnings. Its YTD gains of over 40% rank it in the top ten of the Philadelphia Semiconductor .SOX index, also at record highs. Nvidia NVDA.O is No. 1 at +182%.
So, what's the main focus?
Orders for Q2 will be the key focus, especially after the big miss last quarter hammered the stock and created what some viewed as a buying opportunity.
The consensus on the sell-side has settled around 4.5 billion euros ($4.9 billion). That might hardly surprise anyone, however. Some on the buy-side bet initial new-generation orders from TSMC 2330.TW will lift intake above 5 billion euros.
Marco Simion, fund manager at Swiss-based wealth manager LFG+ZEST SA who owns ASML stock, sees a 52% sequential rise to 5.5 billion euros. His forecasts includes some high 2-nanometre contracts from the Taiwanese group.
He expects the book for the rest of 2024 to remain healthy.
What about the outlook?
Targets for 2024 and 2025 will also be closely watched, as investors gear up for ASML's capital markets day in four months time. Swiss bank UBS, which rates the stock a buy, is upbeat.
"ASML is likely to update its 2024E guide with low to mid single digit revenue growth with 2025 guidance unchanged (and likely to be revisited at CMD November 14," they said.
Are there only blind bulls out there?
Gilles Guibout, head of European equity strategy at AXA Investment Management in Paris, believes the market might have gone a bit too far, at least for now.
He is optimistic about the Dutch group's growth prospects over the medium term. However, "like everything related to AI", he views ASML as is a "bit hyped" in the short term.
"I've had ASML shares for 17 years and I'm happy to keep them but I would struggle to build a strong overweight today," said Guibout. AXA is a top 50 ASML shareholder, according to LSEG data.
Simion sees a "brilliant" future ahead for ASML and views the stock as a must-have stock for tech investors.
"So, I'm not worried if there is a miss or not this quarter. The trend towards the end of the year and the next is much more important. The entire 2024 and then 2025 look brilliant".
A BofA Global Research survey this week showed investors expect an over 5 percentage point outperformance for European tech in H2. ASML was named among the most preferred.
For a preview story, check out: ASML's order book expected to jump on AI chip boom
(Danilo Masoni)
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