26 February 2019Reading time: 3 minutes

One year ago we wrote about the better than expected results which ASML presented and about the positive outlook for 2018. The chip machine manufacturer repeated its target for 2020, to break the turnover limit of 10 billion euro.

Earlier than expected, ASML achieved this target. The fourth quarter results which the chip machine manufacturer presented by the end of January 2019, showed this. The fourth quarter revenue was 3,1 billion euro, which resulted in a record annual revenue for 2018 of 10,9 billion euro. The net profit ended at 2,6 billion euro. The annual revenue for 2017 was 9 billion euro and the net profit was 2 billion euro.

Despite these positive results, investors were disappointed after the presentation of ASML. For the first quarter of 2019, the chip machine manufacturer expects a revenue of approximately 2,1 billion euro. One year ago the first quarter revenue ended on 2,3 billion euro. According to ASML the revenue decline is due to problems with its supplier Prodrive, where a fire raged by the end of last year. ASML believes that this will cause a production delay, which will reduce sales with 300 million euro. However, the company expects to catch up with this later in 2019.

It is necessary for ASML to undo the revenue decline, because the company raised their revenue target last year for the coming years. The chip machine manufacturer now expects a revenue of 13 billion euro for 2020 and that this will continue to grow to somewhere between 15 to 24 billion euro in 2025. However, the future development remains to be seen.

The stock price of ASML has been volatile in 2018. This was especially due to disappointing developments within the chip market. Several chip manufacturers had to lower their expectations as a result of the demand decline and because of the trade conflict between the United States and China. Therefore many investors are worried that this will weaken the demand for chip machines. On July 20th 2018 the stock price of ASML was still at the all-time high level of 189,50 euro but since then the stock price plummeted in the following months to 130,12 euro on December 24th 2018.

Since the start of 2019 the stock price has somewhat recovered itself and is now around 162 euro. It remains to be seen if the demand will increase in the coming months and if ASML can recover from the estimated sales decline in the first months of 2019.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses. The stock is now being traded at a price profit ratio of 14,4 with a dividend yield of 1,7 percent.

Vontobel products on ASML are tradable at DEGIRO.

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25/09/2023 12:26:45