Earnings Preview: What kind of Q4 report will ASML deliver? via /r/wallstreetbets #stocks #wallstreetbets #investing


Earnings Preview: What kind of Q4 report will ASML deliver?

Dutch photolithography giant ASML will announce its fourth quarter 2021 earnings before the US stock market on January 19. The global "chip shortage" continues until 2022, bringing long-term benefits to ASML, but problems including supply chain obstacles and material shortages are also causing problems for ASML's revenue.

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ASML shares rose more than 60% last year and have pulled back this year as tech stocks have cooled.

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Last Quarter Review

ASML's Q3 revenue missed market expectations and net profit was higher than expected. According to the report, under GAAP accounting standards, ASML's Q3 revenue was 5.241 billion euros, up 32.4% year-on-year, lower than market expectations of 5.266 billion euros; net profit was 1.741 billion euros, up 63.8% year-on-year, higher than market expectations of 1.623 billion euros. 15 units of EUV lithography machines were shipped to set a new high for single-quarter shipments, contributing to product sales revenue exceeding 50% for the first time. 50%.

ASML quarterly revenue and year-over-year change. Data source: S&P Capital IQ

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What to watch this quarter

Chip delivery times increased by six days to about 25.8 weeks in December compared to November, according to research from Susquehanna Financial Group. This lag marks the company's longest wait time since it began tracking data in 2017.

ASML's fourth-quarter operating profit is likely to be up from a year ago, reaching analysts' expectations of €6.5 billion for the full year 2021. However, its fourth-quarter sales may be down sequentially due to material shortages, so delayed sales could be confirmed in 2022. sales of EUV (extreme ultraviolet) lithography equipment could grow by about 35% to €6 billion in 2021, while sales of DUV (deep ultraviolet immersion) tools could grow even faster due to global chip shortages. Service revenues are also likely to increase in the fourth quarter compared to the same period of the previous year.

ASML expects net sales in the range of €4.9 billion to €5.2 billion and gross margin in the range of 51% to 52% in the fourth quarter of 2021.

A recent fire at ASML's Berlin plant affected the production of some key equipment. The Berlin plant makes a variety of parts for its advanced extreme ultraviolet lithography machines, which are used to make faster, cheaper and more efficient cutting-edge chips.

ASML said that while there was some disruption to components of the EUV or DUV lithography system, it "is expected to remedy this in a manner that will not impact DUV production and revenue plans.

Analysts are concerned that the fire could exacerbate the global chip shortage, which has been hitting growth across the economy for months.

Analysts' views

ASML appears on many analysts' 2022 recommendation lists.

Morgan Stanley analyst Dominik Olszewski said ASML could generate $34.05 billion or €30.2 billion in revenue this year and as much as $36.08 billion or €32 billion as the European Union continues to build out its 5G network.

Wells Fargo analyst Joe Quatrochi believes that in the long term, in the strong demand for semiconductors and the industry's continued adoption of EUV to enable the transition of the node to 5nm and 3nm and the increasing opportunities for DRAM to begin to emerge in a favorable position

In the longer term, UBS said, the stock should benefit from the "EUV lithography product cycle" given ASML's dominant position in lithography and the potential for significant product pricing increases. Risks include a structural decline in lithography spending.

Analysts Forecast

According to Bloomberg consensus estimates, ASML will report Q4 2021 revenue of €5.116 billion, adjusted net income of €1.521 billion and adjusted EPS of €3.744. 6 of 9 analysts have Buy rating, 2 have Hold rating and 1 has Sell rating with a price target of $882.50.

Submitted January 17, 2022 at 10:47AM by lilyxu185
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