The Dutch maker of the most advanced chip production equipment,
gave investors reason to cheer when it reported gains before the opening bell on Wednesday. The company issued a bullish forecast and told investors it was launching a new share repurchase program worth billions.
ASML’s US-listed stock (ticker: ASML) rose 5.1% in recent trading to $718.86, as the
PHLX Semiconductor Index
increased by 2.5%.
ASML reported second quarter profit above expectations and revenue slightly below consensus estimates. It announced net income of €1 billion ($1.2 billion), which is €1.79 per share, compared to €751 or €2.52 per share in the same period a year ago. Turnover increased by 21% to €4 billion.
Analysts had forecast earnings of €2.47 per share on revenue of €4.1 billion.
ASML executives said the company expects third-quarter revenue of $5.2 billion to $5.4 billion, well above the $4.7 billion analysts had forecast. The company said it has $17.5 billion worth of orders on its books. CEO Peter Wennink said the company raised its full-year revenue growth forecast from 30% earlier this year to 35%.
The company also launched a €9 billion share repurchase program.
Wennick said about $300 million in revenue shifted to the third quarter due to testing requirements, but huge demand for chips in a few markets benefited the company. “[Demand for leading-edge chips is] driven by everything we see around us,” he said, referring to artificial intelligence and high-power computing.
Amid the global chip shortage, Wennink said ASML is selling more software upgrades for its equipment as its customers want to squeeze more production out of existing machines. His software may have a higher margin than his equipment.
ASML’s strength in the chip industry stems from the current monopoly on machines used by
Taiwan semiconductor manufacturing
(005930.Korea) to create the world’s most advanced chips. The manufacturers use extreme ultraviolet lithography equipment to make chips more powerful with atomic-level precision.
ASML also makes machines that use deep ultraviolet technology, which is less lucrative in some cases, but has competitors for that technology.
“When we think about the company’s monopoly position and the greatest visibility across the entire Semiconductor landscape, it’s clear to us why ASML is trading against the multiple it does and why stocks should continue to do better,” Evercore ISI analyst CJ Muse said.
ASML is currently trading at 52 times earnings. In a recent story, Barron’s called the stock expensive compared to other chip equipment suppliers who make more used machines.
Write to Max A. Cherney at firstname.lastname@example.org