Reviewing the semiconductor basics
In order to understand ASML's (NASDAQ:ASML) business, it is helpful to review the process of semiconductor manufacturing and the role of Lithography. To turn a blank sheet of silicon wafer to
ASML's Growth Outlook Set To Surprise To Upside Significantly
Summary
- As a result of cyclical, structural, and geopolitical forces, semi fab equipment capex will be elevated in the next few years, boding well for ASML’s lithography system sales.
- EUV adoption is set to rise across foundry and DRAM players while DUV sales will be structurally higher driven by automotive end-market demand.
- Higher systems sales will in turn drive higher installed base management revenue, which is a higher margin business than system sales.
- I expect revenue to grow 15.2% CAGR across FY21-25, hitting EUR 33bn by 2025, 39% higher than the EUR 24bn stale guidance, and 27.5% above street estimates.
- Applying 45x to my FY22 EPS forecast of EUR 18.3, I derive a target price of EUR820/US$970, representing 23% upside as of 13 August 2021.
I am a personal occasional investor interested in long term fundamental investing. I am most excited by stocks that are misunderstood while exhibiting potential for material re-rating.
Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in ASML over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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