Publication date: 17 oktober 2024

Heavyweight ASML came out with disappointing news earlier than expected this week. So we can rightfully write about this attractive stock again and update the analysis for future share price movement. Read here the previous analysis from July this year. There are certainly some wonderful buying opportunities ahead.

There has been written a lot about ASML in the media this week but in summary, we can say that figures have not met sky-high expectations. We will see this occur more often as we have noted for a while, expectations are set incredibly high.

The result was that ASML closed 15% lower on Tuesday afternoon and has already lost 37% since its peak in mid-July this year. When it rains at ASML, fellow technology companies get wet too. As a result, ASMI, Prosus, and BESI also have lost a lot. Because of the high weighting within the AEX of technology companies (more than 25%), the Index also suffered a major price bump on Tuesday.

What's going on at ASML?

ASML's quarterly earnings were not that bad at all. It even exceeded analysts' expectations. But it's all about expectations. Order intake lagged well behind and revenue expectations for 2025 have been revised downward, due to continued weakness in the chip market. In particular, demand from the automotive industry continues to lag while the market for AI continues to develop well. In short; ASML is doing fine but most likely cannot meet the huge future expectations. The result is the biggest one-day decline in decades.

What can we expect from ASML's share price?

First, let's define the big picture through a chart over the past 5 years. On the left, you can see the rebound after COVID-19. Followed by a significant correction, it then made a substantial advance starting in late 2022. This peaked due to AI hype in July 2024 at the price above
€1,000. From that point, the momentum fades, and ASML nearly returns to a more grounded position, allowing us to prepare for the next stage.

Let's not forget that as the world leader in photolithography, ASML has a fantastic position in an industry with tremendous growth potential. Without explicitly naming all the fundamental factors, we may say that ASML is fundamentally a stock that should be in every long-term equity portfolio.

ASML has also benefited over the past year from the hype surrounding AI which has caused expectations to be set too high. This is evident because the hype is over for a while and the share price is down over 37% in 3 months.

Below is the chart for the past 12 months and the most likely scenario for the next 12 months according to our algorithm.

From the current level of about € 650, we can expect a recovery of about € 690. Then the price of ASML completes the pattern by a final decline to € 540,- and possibly even € 500,-. From there the expected path is again clear for the continuation of the long success trend and we have a price target at the end of 2025 of around € 1150.

Conclusion

ASML is a great company in a wonderful industry with outstanding future prospects.
Expectations within the industry have been too high over the past year causing a correction in recent months.