Why ASML Stock Is Soaring and Hit a New Record High This Week

ASML (ASML 2.57%) stock is making big gains in this week’s trading thanks to strong fourth-quarter results and encouraging guidance. The Dutch semiconductor equipment specialist’s share price was up 14.7% from last week’s market close heading into this Friday’s trading, according to data from S&P Global Market Intelligence.

ASML published its Q4 results on Jan. 24, posting sales and earnings for the period that came in significantly ahead of the market’s expectations. The company reported net income of 2 billion euros on revenue of 7.2 billion euros, beating the average analyst estimate’s call for a profit of 1.87 billion euros and 6.9 billion euros in sales. The strong performance pushed the company’s share price to a new record high in subsequent trading.

ASML’s Q4 reports has investors feeling bullish

ASML’s net income rose 9% year over year, and its sales climbed 12.5% in the period. Notably, the company recorded 9.19 billion euros in net bookings in Q4 — up 253.5% on a sequential quarterly basis and 45.4% year over year. On the other hand, full-year bookings of roughly 20 billion euros were still down roughly 34.7% compared to bookings in 2022.

While the broader chip industry is still going through a cyclical downturn, management is seeing some positive signs. The company also said that it planned to pay a total dividend of 6.10 euros per share for 2023 and would be paying a third interim dividend of 1.45 euros per share before a planned payout of 1.75 euros per share. Assuming that plan is carried out, ASML will have increased its dividend 5% annually.

What comes next for ASML?

ASML is the leading provider of lithography machines that are used to manufacture semiconductors. In the extreme ultraviolet lithography (EUV) category that is used to fabricate the most advanced semiconductors, the company essentially has a monopoly due to its patents. The company is a top supplier of semiconductor manufacturing equipment to Taiwan Semiconductor Manufacturing, and its technologies are used to produce the advanced processors designed by Nvidia and other leading players in the artificial intelligence processor space.

For the first quarter, ASML is guiding for sales to come in between 5 billion euros and 5.5 billion euros and a gross margin between 48% and 49%. For the full-year period, management expects sales to be roughly in line with the approximately 27.56 billion euros it posted in 2023.

ASML looks poised to enjoy long-term tailwinds connected to ongoing growth for the global semiconductor industry and the rise of AI in particular. The business is in great shape and has scale, technology, and resource advantages that will be very difficult for potential rivals to overcome.

Geopolitical dynamics between China and Taiwan and the U.S. and China remain a key risk factor, but otherwise, there’s a lot to like about ASML right now.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

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