Mizuho Embraces ASML for Potential Year-End Gains
Mizuho’s Shift Towards ASML Semiconductor Stock
Mizuho analysts have made a significant shift in their semiconductor stock preferences, moving from TSMC to ASML. This change comes as they see a compelling risk-reward opportunity for ASML, especially as the stock has notably underperformed compared to its industry peers.
Performance Comparison: TSMC vs. ASML
In recent evaluations, Mizuho pointed out that while TSMC shares experienced a rise of 16% in September, ASML has seen minimal movement, with only a 0.8% increase during the same timeframe. This stark contrast has led Mizuho to position ASML as their new favorite stock for potential gains as the year comes to a close.
Strategic Perspective from Mizuho
A Mizuho analyst stated, "ASML is my new favorite single semi long into year-end," highlighting the stock's lackluster performance compared to both the broader semiconductor sector and key competitors such as Nvidia and TSMC. They believe there is a "compelling risk-reward with limited downside" for ASML, making it an attractive option for investors.
Market Sentiment and Buying Opportunity
The sentiment around ASML has recently been weighed down by apprehensions regarding Intel’s capital expenditure cuts and potential risks stemming from restrictions related to China. Despite these concerns, Mizuho interprets this climate as a purchasing opportunity since much of the negative sentiment appears to be baked into the stock's current valuation.
Looking Forward: Upcoming Events
As Mizuho eyes the future, they anticipate stable third-quarter results for ASML in October, alongside an important investor day scheduled for November 14. They emphasize that ASML's management is likely to maintain its long-term revenue targets for 2025, projected between €30-40 billion.
Revenue Expectations and Analyst Outlook
Mizuho analysts suggest that the market might be expecting revenue of around €32-33 billion at best, indicating that even slight adjustments in these estimates could pave the way for a possible price rally. This points to an optimistic outlook for ASML as they prepare for a rebound.
Valuation Prospects for ASML
Positioning ASML wisely, Mizuho predicts an upswing in lithography tool spending, which could lead to a notable expansion in the company’s valuation. Currently, they see the stock trading at a compressed forward P/E ratio of 26-27, but Mizuho forecasts that the valuation could recover back into the 30-32 range with time.
With earnings per share (EPS) estimates for 2024 already trending downward, the analysts at Mizuho view this as an opportunity, suggesting limited downside risk coupled with significant upside potential for ASML’s stock price in the near future.
Frequently Asked Questions
What is the main reason for Mizuho's change in stock preference?
Mizuho shifted their preference from TSMC to ASML due to ASML's recent underperformance and perceived opportunity for year-end gains.
How have ASML's stock performances compared to TSMC?
While TSMC shares rose 16% in September, ASML only increased by 0.8%, leading Mizuho to favor ASML for potential growth.
What are ASML's projected revenue targets for 2025?
ASML's management aims to maintain revenue targets of €30-40 billion for 2025, indicating confidence in future growth.
How do the current market conditions affect ASML?
Current market concerns, particularly around Intel's spending decisions and geopolitical risks, are seen as contributing to a buying opportunity for ASML.
What is the future outlook for ASML according to Mizuho?
Mizuho's outlook for ASML is positive, predicting an expansion in valuation and limited downside risk as the company prepares for potential market recovery.
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