Dutch company ASML (ASML) is a strong candidate for investment in the top-performing semiconductor sector. The chip stock is the current leader of IBD's hot Semiconductor Equipment group, which ranks 13th out of 197 industries.
XAfter breaking out of a cup base and passing a 683.18 buy point on May 18, ASML has traded in a tight range. It remains in a buy zone that goes to 717.34. That low-volatility stretch has also created a three-weeks-tight pattern with a 747.13 buy point.
ASML was featured recently in IBD's Big Cap 20 as strong results from Nvidia (NVDA) sent chip stocks and anything with a notion of AI (artificial intelligence) into a frenzy.
The results were specifically relevant for ASML because Nvidia relies on Taiwan Semiconductor (TSM) for its chips, which in turn relies on ASML's lithography devices.
ASML Holds Virtual Monopoly In Advanced Lithography
ASML's lithography equipment is second to none. And with such a strong competitive advantage over its peers, many have gone as far as to say the company holds a monopoly in the sector. ASML is already a giant, having the largest market cap of any company based in the Netherlands.
That is great news if chip demand and growth remain high. After reporting earnings per share of $15.13 last year, EPS is estimated to increase 34% to $20.30 this year, while surging further to $24.38 in 2024.
Investors will get an update when ASML reports second-quarter results, which are expected July 19. EPS is estimated at $4.95 with revenue of $7.23 billion, according to FactSet. As always, investors will also be keen to any update to company guidance, which is especially important in a fast-paced growth sector like semiconductors.
Risks For ASML's Outlook
In the meantime, economic conditions will likely drive ASML's share price. Recession fears and any risk of slowing orders from ASML's big customers are the biggest risks. Geopolitical tensions may also play a role. The U.S. has been putting pressure on the Dutch authorities to restrict the exportation of all ASML devices to China.
Currently, there are restrictions on ASML's most advanced equipment. A growing semiconductor war adds risk but also immense opportunity for ASML.
ASML Boasts IBD's top Composite Rating of 99 with a strong EPS rating of 95.
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June 10, 2023 at 12:38AM
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Leading Chip Stock ASML Remains In Buy Zone Amid Hot Growth - Investor's Business Daily
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