After the big investor update in November 2022, ASML Holding (ASML -2.41%) Submitted earnings update for Q4 2022 as expected. More importantly, the essential semiconductor manufacturing industry equipment supplier has provided his first guidance for 2023. This is in line with what other chip companies have reported.
It may not be a breakthrough financially, but ASML’s high-tech equipment looks good with this outlook for next year. Long-term profitable expansion is on track and the stock could be a buy here for the right type of investor.
A record year and another is expected in 2023
ASML reports a successful end to a bumpy 2022. Full-year 2022 revenue was €21.2 billion ($23.1 billion), an increase of 14% from 2021.
Our operating margin in the fourth quarter was very healthy at 33% of revenue. This is as ASML continues to recover from supply chain disruptions and new trade restrictions on exports to China imposed by the Netherlands (home country) and the United States (home country). in the flow of the global semiconductor industry).
Data from YCharts.
If you’re chasing ASML’s EUV (extreme ultraviolet) lithography equipment—an advanced piece of equipment that China has now cut off—ASML has been fine in that department. In 2022, from 40 systems he has realized revenues of €7 billion (14 more have been shipped which have not yet realized revenues). So last year his EUV machine had an average selling price of €175 million (about $191 million). ). ASML is currently the only company producing EUV machines. EUV machines are important machines needed to manufacture high-performance semiconductor chips used in AI, smartphones, etc. appleiPhone.
But what about the outlook for 2023? ASML reiterated guidance already provided by ASML customers, including: Taiwan Semiconductor ManufacturingIn other words, the semiconductor industry should remain in recession until the first half of 2023, after which it should resume upward growth.
Specifically, according to ASML, sales in the first quarter of 2023 will be €6.1 billion to €6.5 billion ($6.7 billion to $7.1 billion), down from the just-reported quarter but ahead of the first quarter of 2022. A significant increase from 3.5 billion euros in the quarter. It should resume in the second half of 2023, especially as demand for chips from consumer electronics begins to recover.
ASML wants us all to get along
That said, ASML’s top teams were cautious in 2023. As in the event of a deep recession, there are still challenging economic prospects that could dash upward progress. There are also geopolitical risks. The US has reportedly expressed interest in extending China’s export ban to its older generation of DUV (deep ultraviolet) lithography equipment beyond EUV equipment, but ASML opposes this stance. increase. China accounted for her 14% of system sales last year, even though she couldn’t afford her most expensive EUV equipment.
The reason is that even after the global pandemic and ensuing supply chain risks, the semiconductor industry relies heavily on global collaboration. Even though various governments around the world (led by the United States) are pouring money into trying to bring chip manufacturing back to their own shores, his chain of globally dispersed chip supplies is not going away. ASML really wants everyone to get along. If the government does not do so, it could be even more negatively disruptive for companies.
Is ASML stock a buy?
There were few surprises in this quarterly update, but the main point is that we want our shareholders to know that ASML is on track to meet its long-term goals. Entering 2023, he has a huge backlog of €40.4 billion in systems and services revenue. Demand still exceeds ASML capacity. That’s a good question. In other words, it will take time for chip makers to put the brakes on ASML equipment orders beyond a temporary drop in chip demand through early 2023.
In November 2022, management said it expects annual sales to reach €30-40 billion by 2025 and €44-60 billion by 2030. Gross margin of 50.5% in 2022 will reach 60% by 2030.If it goes well, sales will go up considerably. When Profit rate.
At about 44x earnings in the 12 months after the fourth quarter report, ASML certainly isn’t stealing a deal from a few months ago. While earnings are likely to rebound significantly heading into 2023, a rise in current valuations could create some bumps in the stock. But if you’re still looking at what’s possible in the next 5-10 years, ASML may still have plenty of room to grow.
Nicholas Rossolillo and his clients have held positions at ASML and Apple. The Motley Fool US headquarters recommends ASML, Apple and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: Apple’s March 2023 $120 Long Call and Apple’s March 2023 $130 Short Call. The Motley Fool’s U.S. headquarters has a disclosure policy.
