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ASML stock forecast 2025: is it time to buy now?

asml

Hello everyone, recently, because the market has a lot of fears about rising interest rates and shrinking the balance sheet, the Nasdaq as a whole has fallen a lot, and each support has basically been broken one after another. The general price has also broken, so there is no good signal to increase positions in the short term. It may be safer to hold cash first and wait until the decline begins to slow down a little or see a really cost-effective price before considering adding positions.


However, the long-term bull market in the future will not end because of this year's interest rate hike, and cash will only become more and more worthless in the long run. In the short-term continuous decline of the stock market, we must put our minds in a positive state. At the same time, we must properly organize our thoughts and positions, prepare bullets, and use this time to do our homework for the stocks we are interested in.


In this way, when a good price appears in the future, you will be able to seize the opportunity to buy high-quality companies. Therefore, in addition to discussing the market and sharing my future plans today, we will also take a look at the two companies that have reported earnings this week. Companies, one is ASML and the other is Netflix.


The reaction of the stock price after Asmar's financial report came out was okay, but the stock price of Netflix plummeted by 22% after the financial report came out, so today we will take a look at their fundamentals after this financial report is out, whether there is any At the same time, we will also take a look at the price at which their valuation is more appropriate. After all, the cycle of rising interest rates and shrinking the balance sheet has certain pressure on valuation, so it is very important to increase positions at a cost-effective price. Of course, This is just my personal opinion, not investment advice, investment is risky, everyone must think independently.


Then let’s start, first of all, let’s take a look at ASML’s financial report.


ASML's EPS in the fourth quarter of 2021 exceeded analysts' expectations, but revenue-again fell short of analysts' expectations. Basically, from the second quarter of 2021, revenue has not exceeded analysts' expectations. This is because ASML's customers are in a hurry to use their newly purchased lithography machines and want to quickly put them into production. ASML itself also wants to send the machines quickly and shorten the cycle to increase shipments As a result, many lithography machines are too late to perform product inspections before they are shipped out, and the revenue of these lithography machines that have not been produced and tested cannot be recorded in the current quarterly financial report.


Therefore, a part of ASML's lithography machine revenue is delayed to the next quarter's record in each quarter, and how much revenue is delayed is entirely determined by ASML and uncontrollable factors in the current quarter, and it is difficult for analysts to be accurate. The forecast of how much lithography machine revenue was delayed in the current quarter, which led to ASML's revenue continuing to be lower than analysts' expectations last year, so it is necessary to analyze ASML's revenue. The fundamentals of ASML should be judged by looking at the overall revenue in the next year, not just by looking at whether the revenue in a quarter is Miss or Beat.


Because we will see from the financial report later, the delayed record of ASML's revenue has caused a great impact on the short-term book, but in fact, there is no problem with ASML's profitability, and ASML has not Making less money, it’s just that the money earned has been delayed by a quarter, but when it comes to making money, let’s take a look at the details of ASML’s financial report in the fourth quarter of last year. ASML’s revenue in the fourth quarter of 2021 has 4.98 billion euros, an increase of 17.5% year-on-year and a month-on-month decrease of 4.8%, just in the middle of the previous guidance. The reason why this revenue did not reach the highest range of the guidance is that the supply chain problem dragged down the revenue, but In the third quarter financial report of last year, ASML has already reminded investors about the supply chain problem, so the market has been psychologically prepared in this regard. Although the revenue did not reach the highest value of the guidance, the revenue from the software upgrade business In the fourth quarter of last year, it was still quite strong, reaching 1.522 billion euros, an increase of 44% year-on-year and a month-on-month increase of 34.69%. This is significantly higher than the previous guidance of 1.1 billion euros, exceeding expectations by 38%, obviously.


ASML's production capacity could not meet the market demand in the fourth quarter of last year, so the foundry could only rely on software upgrades to increase the production capacity of the existing lithography machines, which led to problems in software management and maintenance. Revenue significantly exceeded ASML's expectations in the fourth quarter of last year. Not only that, but the high revenue from software management, maintenance, and upgrades also made up for the negative impact of supply chain problems. ASML's overall revenue also reached within the guidance range given earlier.


In addition to overall revenue, profit margins also benefited from software management and maintenance upgrades. Because of the high gross profit of software upgrades, ASML's overall gross profit margin will be as high as 54.2% in the fourth quarter of 2021. The gross profit margin of 51% - 52% is higher than the previous guidance, which is very good. ASML's profitability is impeccable. As for the overall revenue of 18.6 billion euros in 2021, an increase of 33%, the gross profit margin for the whole year is as high as 52.7%, and the net profit is also as high as 58.8 billion euros, an increase of 65.6%. This high net profit also allows ASML to give back to shareholders vigorously in 2021.


ASML has repurchased shares worth 8.6 billion euros in 2021 and distributed a dividend of 1.4 billion euros. The year-on-year increase in dividends is also as high as 100%. Not only that, but currently 1/6 of the net profit will be returned to shareholders, And the net profit of ASML is getting higher and higher with time, and the free cash flow is also increasing, and the funds returned to shareholders will naturally be more, which will bring negative impact on the stock price of ASML in the long run. less impetus.


Well, after talking about 2021, it's time to look at the guidance for 2022, which is also the part that the market is most concerned about. The guidance for the first quarter of 2022 does look a bit scary on the surface. The revenue forecast for the first quarter of this year is estimated to be between 3.3 billion - 3.5 billion euros, which is a 22% year-on-year decrease and a 32% month-on-month decrease, which may seem a bit scary at first glance, but in fact, it was only because 2 billion revenue was delayed In the second quarter of this year, to shorten the cycle and send lithography machines to customers as soon as possible, ASML chose to temporarily skip the inspection to quickly send 2 billion euros worth of lithography machines, resulting in this 2 billion lithography machine. The revenue of the lithography machine cannot be recorded in the financial report of the first quarter of this year but will be recorded in the financial report of the second quarter of this year. As for the fourth quarter of last year, the revenue was delayed to the first quarter of this year. 100 million euros, obviously unable to offset the 2 billion revenue that was delayed in the first quarter of this year.


So if we calculate the total shipments in the first quarter of this year, the value of shipments will be between 5.3 billion and 5.5 billion euros, which is a great result, so ASML in the first quarter of this year The low revenue guidance is purely due to the accounting method and time record, not because of fundamentals or business problems. However, the delayed revenue record not only affects the current quarter's revenue but also affects the gross profit margin. , In the first quarter of 2022, due to the delay in revenue records, the gross profit margin is estimated to be only 49%, which is much lower than the average gross profit margin of 52.7% in 2021 and the 54.2% gross profit margin in the fourth quarter of last year, but the gross profit margin is estimated Only 49% is also because the software upgrade business is expected to slow down in the first quarter of this year. The software management upgrade revenue is expected to be only 1.2 billion euros in the first quarter of this year, which is lower than the 1.5 billion euros in the fourth quarter of last year. the fourth quarter of last year.


ASML's customers have already upgraded their software, and naturally, there will be fewer upgrades in the first quarter of this year, but the low gross profit margin guidance in the first quarter of this year is mainly due to the 2 billion battalion that was delayed in the first quarter of this year. Therefore, there is no problem with the actual profitability of ASML. It is all a matter of revenue recording time. It should also be noted that the actual gross profit margin of ASML was 1-2 higher than the guidance in the past. It is about a percentage point, so the actual gross profit margin of ASML in the first quarter of this year is likely to exceed 49% or even more than 50%. As for the gross profit margin guidance for the whole year of 2022, ASML is expected to be 53%. Therefore, the 49% gross profit margin guidance in the first quarter of this year is not to worry about. This year is good for the whole year. In addition, at the shareholder day at the end of September last year, ASML also estimated that the gross profit margin in 2025 will be Rising to between 54% - 56%, based on the historical gross margin upward trend of the past 5 years, 2025 is indeed likely to be done, and with the future increase in Asmar's gross margin, share buybacks and dividend payments will be Increase, it will be a long-term virtuous circle.


The full-year revenue guidance for 2022 is also very good. This year's full-year revenue growth is expected to be 20%, which is 3 percentage points higher than the 17% previously estimated by analysts. However, the 20% revenue growth rate On the surface it may look like a lot of slowdown from last year's 33%, but it's actually because 6 of the 55 EUVs expected to be shipped this year will have their revenue delayed until 2023, so if we factor in this If there are 6 EUVs, then the revenue growth for the whole year of 2022 is estimated to be 25%. However, because ASML only records the revenue of the machines that have been tested, the revenue growth recorded in this year's financial report is only 25%. It is only 20%, but its actual growth rate is 25%, but when it comes to this, I have to mention the fire at the ASML factory in early January this year. In the beginning, many analysts believed that the fire would affect the short-term production capacity and revenue. There will be a certain impact, but ASML said in the earnings conference call that the fire will not affect ASML's revenue in 2022.


As for why the fire will not affect the revenue in 2022, Asmer explained: "The fire affected only a part of the Berlin factory. At present, part of the delivery room has resumed operation, and the delivery room next door has not been affected. Continue The normal operation of the deep ultraviolet light parts production line has also started to restart, the EUV production line will also be restored smoothly, and the fire has not injured anyone." So according to ASML's latest report, the fire at the beginning of this year brought about The loss is within a controllable range. As for the company's outlook for the future industry, it is actually similar to what was said in the conference call of TSMC's financial report.


To sum up, for the long term, we have entered a "structural high growth period" for semiconductors. The demand for semiconductors will still be very high in the short-term 1-2 years, and the inventory in 2022 will still be very tight. The capital expenditure will also be high. For example, TSMC's capital expenditure in 2022 will be as high as 40-44 billion US dollars, which is the highest expenditure in history. This will undoubtedly help ASML to increase revenue growth because the foundry will pay ASML to ASML. Mai buys lithography machines, and ASML is also in a leading and monopoly position in the industry, but ASML’s share price has risen so well in 2021, and it may have already priced in some of the huge capital expenditures of future wafer foundries. It’s good. From the second half of last year to the present, ASML has been digesting the valuation. At present, the share price of ASML has fallen below the support of $710, and the next support is at $670. If you just look at the valuation, then the price is better. I think it is below $600, of course, it is not necessarily whether $600 can reach this price, but from the perspective of valuation, I think the price/performance ratio of ASML below $600 will be better. After all, the recent interest rate hike has killed the valuation. fierce.


Overall, the financial report this time is not bad, but it has not reached the point where people feel "wow". After all, a good financial report is within expectations. There is no problem with ASML's long-term holding, and the fundamentals are still very good. It's just that the expectations after buying in the short term should not be too high, because the short-term market is not very clear, and ASML's share price also needs to slowly digest the valuation.

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