ASML raises medium-term expectations

ASML raises medium-term expectations

19 October 2021Reading time: 3 minutes

As a result of the corona crisis, the demand for digital communication solutions in particular has accelerated. In addition, semiconductors are also used in an increasing number of other devices, such as electric cars, smartphones, solar panels, digital entertainment, industrial machines and household items.

However, the current production capacity of chips is not in line with the explosively increased demand, while logistical problems worldwide are creating additional challenges. The demand for chips will therefore remain strong in the coming years, according to ASML.

Strong second quarter results ASML

ASML presented its second quarter results on July 21. The chip machine manufacturer recorded an annual turnover increase of 20.7 percent to EUR 4.02 billion. The gross margin for the past quarter was 50.9 percent, an improvement of 2.7 percentage points compared to the same period last year. Net income for the second quarter of this year thus amounted to EUR 1.04 billion, resulting in earnings per share of EUR 2.52. For the third quarter of this year, ASML expects a turnover of EUR 5.2 to 5.4 billion and a gross margin of 51 to 52 percent.

Significant outlook increase

Although the second quarter results were in line with analysts' expectations, ASML managed to surprise investors and analysts during its Investor Day in September. As a result of particularly strong improved margins and favourable market developments for the company, ASML raised its expectations for the mid-term.

The chip machine manufacturer now expects an annual revenue between EUR 24 and 30 billion in 2025. ASML previously expected a turnover of EUR 15 to 24 billion in 2025. For the same year, the expected gross margin has been adjusted from 50 percent to 54 to 56 percent. Between 2020 and 2030, the revenue will have to grow by approximately 11 percent per year. This would mean a slowdown in growth, because between 2020 and 2025, annual revenue growth will be 11 to 16 percent, according to analysts. This would mean revenue growth in subsequent years would be about 6 to 10 percent. An increase in the production capacity of EUV machines before 2023 may contribute to the achievement of the new targets, but it remains to be seen how the chips market will develop in the longer term.

In addition to revised expectations, ASML also announced that it plans to return excess capital to shareholders through a new share buyback program worth EUR 9 billion and an increase in dividend.

Stock price development

After ASML's stock price rose above the EUR 750 mark on September 23, it has subsequently fallen by 17.7 percent and is now at EUR 619.13 (11.10.2021). This means that on an annual basis, the stock price is currently still 78.9 percent higher.

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.

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24/01/2022 01:11:29