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  • Writer's pictureRealFacts Editorial Team

ASML Shares Tumble On Sales Miss

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ASML, Europe's leading tech firm, faced a large market selloff as it reported a significant decline in orders due to a pullback from its Taiwanese and South Korean customers. ASML specializes in developing, producing, selling, and servicing cutting-edge semiconductor equipment systems tailored for chipmakers. The company earned $3.31 per share on sales of $5.63 billion in the March quarter, slightly below analysts' expectations of $5.87 billion in sales. Looking ahead, ASML predicted sales of $6.33 billion for the current quarter, falling short of analysts' estimates of $6.89 billion. Following this news the stock dropped more than 7% reaching a two-month low.

Analysts speculated whether these challenges signaled broader macroeconomic concerns or if they were specific to the company's inventory management. During "Bloomberg Markets: The Close," Andrew Gardiner, Citi's Head of European Tech Equity Research, declared that the challenges faced by ASML were primarily specific to the company. He attributed the missed orders to a timing issue rather than indicating a broader weakness in the industry cycle. He highlighted ASML's reiteration of revenue guidance for 2024 and 2025, suggesting that the setbacks were temporary. The company's CEO characterized 2024 as a transition year with key customers navigating between technology nodes. These fact, according to Gardiner, indicate a period of adjustment rather than fundamental weakness in ASML's long-term prospects.

Additionally, pressure from the Biden administration and ongoing efforts by the US government to restrict ASML's operations in China pose significant challenges for the company's future. Gardiner acknowledged the mounting pressure and noted that the highest-end machines produced by ASML have never been permitted in China. Recent restrictions have affected a portion of ASML's Chinese revenue base, comprising about 10 to 15% but this has already been factored into market expectations. Despite these setbacks, China remains a substantial market for ASML, representing a significant portion of non-leading-edge equipment sales which creates challenges if further restrictions are put in place. Despite the sales setback and possible headwinds from government restrictions, Gardiner remains bullish on ASML. He stated, “It's my view that it is still an attractive name. You're in the mid to high 20s in terms of forward earnings at this point, but this is a rapidly growing name. It's a monopolist effectively in its market, so I think it's worth that premium multiple.”

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