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ASML stock forecast: Should investors buy the dip?

By Ryan Hogg

Edited by Jekaterina Drozdovica


Updated

ASML logo at headquarters in Silicon Valley. ASML, a Dutch company, is the largest supplier in the world of photo-lithography systems for the semiconductor industry - San Jose, CA, USA - 2020
ASML stock forecast – Photo: Shutterstock

ASML Holding (ASML) was one of a collection of semiconductor stocks to enjoy bumper 2021 growth as demand outstripped supply.

Yet despite this the stock wasn’t immune to the tech share price crunch that has pushed its share value down 17% in the year to date. European ambition on digital sovereignty, and signs of overvaluation among competitors, may help the stock rebound.

Can the stock regain momentum? Here we take a look at which factors are shaping the ASML stock forecast in 2022.

ASML stock analysis

Semiconductor stocks enjoyed bumper pandemic-era growth on the back of wider macroeconomic expansion and high demand from manufacturers for chips that met with low supply. ASML’s stock more than quadrupled from its low of €215 on 20 March 2020 to €759.90 at its peak on 19 November 2021.

The stock saw an initial selloff at the end of September 2021 on the back of a price target downgrade by Pierre Ferragu at New Street Research, as investors also became jittery about the first signs of macroeconomic contraction.

Despite a resurgence from that fall, the stock has been in a more sustained downturn since the end of November. A bear market that began in 2022 has seen the chip producer give up much of its 2021 gains. The stock has fallen more than 22% year-to-date, consistently breaking through previous moving averages and supports as the wider tech market faces a reckoning.

ASML stock price chart designed by Capital.com

An ASML stock technical analysis shows the stock could have further to fall. One-day oscillators were neutral at the time of writing (22 February) but threatened to turn negative. This included a neutral relative strength index (RSI) of 36.7. A fall of below 30 would bring the stock into an oversold territory, indicating a possibility of price trend reversal. 

The stock’s 21 February closing price of €550.80 sits perched between its pivot point of €622.50 and its S1 support of €528. Technical indicators generally point to pessimism for the stock to add to an already difficult 2022.

Chip shortages and further price pressures ahead

It has been impossible to detach analysis of the global semiconductor market from the glut of supply that has gripped the globe in the last year. Semiconductor prices rose for the first time since 1993 as years of cost-cutting innovation finally gave way to excess demand.

Despite shortages, the Semiconductor Industry Association (SIA) reported that the industry enjoyed record production in 2021, selling 1.15 trillion semiconductors for $555.9bn (£417.6bn), a 26.2% increase from 2020. 

The data, compiled by World Semiconductor Trade Statistics (WSTS) indicates Europe, ASML’s base, grew semiconductor production by the second-fastest rate across major areas, at 27.3%, behind the US (27.4%) and ahead of China (27.1%).

In general, the companies supplying those chips appear to be holding up better than customers paying a premium to use them in their own production. IC Insights’ 25th edition of The McClean Report expects around 17 companies to have enjoyed sales of more than $10bn last year, while SIA forecast 8.8% growth for the industry in 2022.

Yet other input costs risk weighting on the main customers of semiconductor companies and on the prices passed onto consumers, which could affect overall demand.

The main customers of chip technology are electronics companies, with Apple (AAPL), Samsung (SMSN) and Lenovo (0992) at the top of a table that saw customer spending on semiconductors increase by 25.2% in 2021, according to Gartner research.

But as inflation persists, surpassing 5% across the major Western economies of the eurozone, the UK and the US, question marks may persist about how much consumers may choose to prioritise the purchase of the latest smartphone.

Renewed European ambition on chip production

In the latest ASML stock news, the company called for an alliance across members of the European Union to build a roadmap to strengthen European chip production. It came against the backdrop of shortcomings in the EU’s supply chain magnified by recent shortages. 

The European market made up just 3% of the global semiconductor market in 2020, with companies like Bosch and Continental spending billions on chips mostly made outside Europe. The cost of that misalignment is now evident.

Semiconductor market break down in 2022, illustrated by Capital.com

Recent research by the European Central Bank (ECB) outlined how pervasive the supply chain shortage had been in the euro area. Where semiconductor imports had typically grown by more than 5% in the year leading up to the pandemic, they have since contracted, with imports dropping by more than 5% in each of the months since June 2020. The study pointed out this had led to a spike in bottlenecks, particularly in the chip-dependent auto and technology sectors, where supplier delivery times were five times their normal rate.

The data showed that more than a third of producers in the computing, electrical and motor vehicles industries viewed a shortage of material and/or equipment as a factor limiting production.

Semiconductor imports in the Euro area chart

ASML’s desire for more European chip infrastructure adds to recent calls by the European Union to strive for digital sovereignty, by cutting its dependence on semiconductor chips from outside the bloc.

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ASML’s statement came after the bloc introduced a European Chips Act, which pledges more than €43m by 2030, including investment in next-generation technologies and a more investor-friendly framework for production of chips.

Investors may accordingly look at ASML as an undervalued technology, with the potential of a 27-nation strong piggybank ready to pump infrastructure investment into a European market that AMSL could be primed to deliver into.

Detractors are however nervous that the push for digital sovereignty across various geographies could create oversupply, a sentiment ASML tried to quell in its 2021 annual report.

Full-year results reveal revenue growth

ASML reaped the benefits of a hot semiconductor sector last year, as demonstrated in the full-year 2021 results released on 9 February 2022. The upbeat earnings release allowed a short respite from a sustained downfall in its share price since the beginning of the year, if not a resurgence like that seen on release of previous results.

Sales for the fourth quarter of 2021 reached €5bn, for total annual sales of €18.6bn, representing annual growth of 33.1%. Results continued to demonstrate the company’s lithography might. The firm’s biggest sub-market, Logic, grew by 29.7% in 2021 against 2020, making up 51.5% of 2021 sales.

Revenue growth in Logic and Memory markets chart

The company spent a total of €2.5bn in 2021 on research and development (R&D), adding to total cost of sales of $8.8bn. ASML was hit by a fire in part of its Berlin site in early January, but it announced two weeks later that it did not expect the incident to have a major impact on production or costs this year.

ASML’s earnings per share (EPS) for Q4 2021 was €4.39, adding to total EPS for 2021 of €14.36. ASML is trading in the middle range of chip-producing competitors on the basis of price-to-earnings (P/E) ratio, suggesting there is a potential for fundamental-based upside against companies like Taiwan Semiconductors (TSM), Qualcomm (QCOM) and Intel (INTC).

ASML, Nvidia, TSM, Qualcomm and Intel P/E ratio chart

The chipmaker is in the midst of a long-running share buyback scheme that accelerated in 2021. 

ASML repurchased shares worth €17.1bn, almost doubling the 2020 figure of €8.6bn. In July 2021, the company announced its plan to spend €9bn on share repurchasing between 2021 and 2023, with €5.5bn purchased since the announcement, allocating €0.45m to cover employee share plans.

ASML proposed a dividend per share of €5.50 for its shareholders based on 2021 results.

The company’s outlook pointed to expected sales growth of 20% in 2022, based on increased individual sales including a 20% growth in sales of Logic, forecasting a gross net margin of 49%. The company projects average annual growth in its main markets, including smartphone, personal computing and automotive, to be 8.2% through 2025.

ASML share price forecast

ASML stock predictions are complicated by limited forecasts presented since the tech market tumble that has proceeded through 2022. Given that upheaval, investors are left asking if ASML stock is buy, sell or hold.

Based on the outlook of 20 analysts compiled by MarketBeat for the ASML’s US market holdings, the stock had a consensus ‘buy’ recommendation, with 13 analysts rating it as a ‘buy’, five as a ‘hold’ and two as a ‘sell’. 

The average ASML stock price target for the next 12 months stood at $875, projecting 35.18% of potential upside based on the current share price (22 February). The targets ranged from a low of $660 to a high of $975. On the European market, the stock has an average price target of €737, equivalent to $833.66.

ASML price targets and ratings chart

The most recent coverage came from Jefferies Financial Group on 17 February. The company gave the stock a buy rating with a price target of €700 in its initiated coverage of the company. This followed a 21 January €945 target by Credit Suisse, contrasting with Deutsche Bank’s more negative outlook of €600 delivered on 20 January.

Wallet Investor, an algorithm-based forecasting service, provided an ASML share price target for 2022–2025. The site’s outlook was highly optimistic at the time of writing (22 February), with a price target of $847.86 in December 2022, rising to $1,079.23 in December 2023, and $1545.28 in December 2025. In five years’ time, in February 2027, ASML is forecast to reach $1802.17.

AI Pickup’s algorithm service provided forecast out to 2030, where its share price was forecast at a much more conservative $738.19.

Note that price predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

FAQs

Is ASML a good stock to buy?

There are fears that oversupply from a whiplash to 2021 shortages could put downward pressure on chip prices, but investors still appear mostly optimistic that chip demand and prices will remain resolute, as will ASML’s stock in turn. 

Remember that your decision to trade or invest should depend on your attitude to risk, your expertise in this market, the spread of your portfolio and how comfortable you feel about losing money. Never invest money you cannot afford to lose.

Will ASML stock price go up or down?

Based on the outlook of 20 analysts compiled by MarketBeat for the ASML’s US market holdings, the average ASML stock price target for the next 12 months stood at $875, projecting 35.18% of potential upside based on the current share price (22 February). The targets ranged from a low of $660 to a high of $975. 

Note that analysts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

Markets in this article

AAPL
Apple Inc (Extended Hours)
224.55 USD
-0.28 -0.120%
ASML
ASML
895.63 USD
-27.89 -3.020%
ASMLnl
ASML NV
831.60 USD
-9 -1.070%
INTC
Intel Corp (Extended Hours)
33.09 USD
-1.97 -5.640%
0992
Lenovo
10.32 USD
-0.24 -2.290%

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