ASML shares target cut by BofA with Buy rating maintained

BofA Securities has revised its price target on shares of ASML Inc. (NASDAQ: ASML), reducing it to $1,149 from the previous $1,406.

Despite the adjustment, the firm maintains a Buy rating on the stock. This decision follows a reassessment of the company’s earnings projections for the fiscal years 2025 and 2026, which have decreased by 11% and 8%, respectively, due to lowered revenue expectations.

The analyst’s revised forecast now aligns closely with the consensus for both sales and earnings per share (EPS) for the upcoming years.

The new projections are set at €36.7 billion and €30.82 for fiscal year 2025, as well as €40.2 billion and €34.46 for fiscal year 2026. These figures are in line with the consensus of €37 billion and €30.85 for 2025, and €40.7 billion and €35.86 for 2026, respectively.

The reassessment comes at a time when ASML’s stock is trading at 17.4 times the projected earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) for fiscal year 2025. This valuation is considered highly attractive by BofA Securities, especially when compared to the stock’s historical median multiple of 26.6 times and its 5-year range, which spans from 18.1 times to 37.6 times.

In support of the Buy rating, the analyst cited the current multiples, which are below the 5-year median and the lower end of the stock’s historical range. Additionally, the price objective has been recalculated based on reduced EBITDA estimates and lower multiples, moving from 31 times to 28 times, reflecting a broader sector de-rating.

In other recent news, ASML Holding NV (AS:) has been at the center of multiple analyst revisions. BofA Securities maintained its Buy rating but reduced the price target due to lowered earnings forecasts for 2025 and 2026.

Morgan Stanley also adjusted its price target for ASML, but maintained an Overweight rating, anticipating a significant recovery in ASML’s earnings by 2024. In contrast, UBS downgraded ASML’s stock from Buy to Neutral, expecting a deceleration in the company’s earnings per share growth rate.

Meanwhile, Barclays upgraded ASML’s stock from Equalweight to Overweight, viewing the recent drop in the company’s stock as an attractive investment opportunity.

InvestingPro Insights

As ASML Inc. (NASDAQ: ASML) navigates through reassessed earnings projections and a revised price target by BofA Securities, real-time data from InvestingPro provides additional context to the company’s financial health and market position. ASML’s market capitalization stands robust at $310.08 billion, reflecting its substantial presence in the semiconductor industry. Despite recent price fluctuations, with a 24.3% drop over the last three months, ASML’s financial fundamentals remain strong. The company boasts a solid gross profit margin of 51.44% over the last twelve months as of Q2 2024, underlining its operational efficiency. Moreover, ASML’s ability to maintain dividend payments for 18 consecutive years, alongside a dividend growth of 8.84% in the same period, signals a commitment to shareholder returns.

Investors considering ASML should note that the company is trading at a high earnings multiple, with a P/E ratio of 41.33, suggesting a premium valuation relative to earnings. This is reinforced by a high Price / Book multiple of 18.95, indicating investors are willing to pay more for each dollar of book value. However, the company’s prominent role in the Semiconductors & Semiconductor Equipment industry and its consistent profitability over the last twelve months can justify these higher valuation metrics to some investors. For those seeking a deeper dive into ASML’s performance and strategic positioning, InvestingPro offers additional tips and insights, with 15 more InvestingPro Tips available to help inform investment decisions.

For a more comprehensive analysis of ASML’s financials and market performance, including the latest analyst predictions and fair value assessments, visit https://www.investing.com/pro/ASML.

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