ASML Holding, the Dutch semiconductor manufacturing equipment supplier, has experienced a period of underperformance in the semiconductor market, despite reporting better-than-expected results and strong order growth. The company’s stock took a hit following the release of its second-quarter 2024 results, primarily due to concerns over potential sanctions on the export of semiconductor equipment to China imposed by the Biden administration.
Despite exceeding consensus estimates with revenue of 6.24 billion euros and net profit of 1.58 billion euros, ASML’s stock fell nearly 13%. The market seemed to overlook the company’s robust net bookings growth of 24% year over year, reaching 5.6 billion euros, driven by the increasing demand for advanced chips used in artificial intelligence applications and smartphones.
ASML’s bookings for its extreme ultraviolet (EUV) lithography systems, utilized in manufacturing advanced chips with process nodes of 7 nanometers or smaller, reached 2.5 billion euros. This surge in demand can be attributed to major tech companies such as Apple, Nvidia, AMD, and Intel utilizing or manufacturing chips based on 5nm and 3nm nodes.
While ASML expects a stronger financial performance in the second half of the year due to improving conditions in the semiconductor market, investors expressed concerns over the company’s guidance for the current quarter. ASML’s projected revenue of 7 billion euros at the midpoint fell short of Wall Street’s estimate of 7.5 billion euros.
Considering the recent trend of stock splits among tech giants to lower share prices and increase accessibility to a wider pool of investors, some speculate whether ASML’s management will opt for a similar move. However, it is important to note that a stock split is merely a cosmetic change that does not alter a company’s fundamentals or market cap. While Nvidia experienced a significant stock price jump after announcing a stock split, the same outcome is not guaranteed for ASML.
With each ASML share trading at around $930, a stock split could potentially make the stock more accessible and increase demand, leading to a price boost. Nevertheless, investors should consider ASML’s healthy long-term growth prospects, including a total order backlog of 39 billion euros and the projected growth of the global semiconductor market, estimated to exceed $2 trillion in annual revenue by 2032.
ASML holds a monopoly on EUV machines, positioning the company to capitalize on the increasing demand for semiconductor manufacturing equipment. Market Research Future estimates that the EUV lithography market alone will generate $63 billion in annual revenue by 2032. As a result, ASML could continue delivering strong top- and bottom-line growth.