U.S. shares of ASML Holding NV rallied Wednesday after the Dutch chipmaking-equipment supplier’s better-than-expected results and raised outlook boosted shares of peers like Lam Research Corp., which is reporting its quarterly results after the close of markets.
Early Wednesday, ASML
reported third-quarter net income of 1.7 billion euros, or 4.29 euros a share, compared with 1.74 billion euros, or 4.26 euros a share, in the year-ago period. The company also reported that revenue rose to 5.78 billion euros from 5.24 billion euros in the year-ago period.
Analysts surveyed by FactSet had forecast earnings of 3.56 euros a share on revenue of 5.44 billion euros, based on the company’s forecast of 5.21 billion to 5.51 billion a share.
More importantly, the company hiked its forecast for the fourth quarter, when many tech companies have been slashing theirs. ASML said it expects sales between 6.1 billion and 6.6 billion euros, excluding about 100 million euros of delayed net revenue that was forecast last quarter and caused the company to cut its outlook, casting a pallor over the sector. Analysts expect revenue of 6.37 billion euros.
American depositary receipts of ASML rallied as much as 8% Wednesday, while Lam, which reports its earnings after the close, saw its shares rise nearly 3%, as the broader market slumped with both the S&P 500 index
and the tech-heavy Nasdaq Composite Index
down more than 1%, and the PHLX Semiconductor Index
As supply-chain problems ease and become more predictable, ASML sees shipping rates increasing as it is able to manufacture backlogged products, said Chief Executive Peter Wennick, following the release of results.
“Building on this progress, we feel we are well positioned to further increase our capacity next year,” Wennick said.
That proved to fly in the face of recent trends, as the two-year-long global chip shortage flipped to a glut, causing chipmakers to cut outlooks, and fabs to start curbing capacity, like Taiwan Semiconductor Manufacturing Co.
recently did. ASML also benefitted from shallow exposure to a recent widening of U.S. restrictions on advanced tech sales to China.
“With regards to the announcement earlier this month from the US government around export control restrictions, we have performed our initial assessment and expect the direct impact on ASML’s overall shipment plan for 2023 to be limited,” Wennick said. “However, there could be an indirect impact due to the inability of other equipment suppliers to ship their systems. Our current expectation ofsuch an indirect impact would be around 5% of our backlog.”
In a note titled, “Record Bookings, Robust Backlog, & Intact Build Plans – Who Could Ask for More,” Evercore ISI analyst C.J. Muse heaped praise on the company, noting the only sticking point to the report was a forecast of high-than-expected operating expenses. Muse has an outperform rating on the stock.
“Notwithstanding this headwind, it was overall a stellar report for ASML within today’s backdrop — record bookings, growing backlog, and reiteration of CY23/25 build plans,” Muse said.
Citi Research analyst Amit Harchandani, who also has a buy on the stock, was a little more cautious in his note.
“We believe these results serve as strong evidence of the relative appeal of ASML’s long-term fundamentals — which in turn underpin our Buy recommendation on the stock,” Harchandani. “However, we still expect the debate to continue as investors aim to reconcile ASML’s optimism with broader macro / semiconductor cycle pessimism.”
Of the 31 analysts who cover ASML, have 25 buy-grade ratings, five have hold ratings, and one has a sell rating.