From Nasdaq Inc.:

In 2024, ASML will supply its latest-generation extreme ultraviolet (EUV) equipment to Intel for use in its 18A manufacturing process with commercial production targeted for 2025. Despite expected financial turbulence for the first half of the year, ASML had a record year for sales and profitability in 2023. Photronics, a top producer of photomasks, also posted a record year for sales and profitability in 2023 and is expecting revenue in the first quarter of 2024 to be up 3% to 7% year over year and adjusted earnings per share (EPS) to rise 13% to 33%.
ASML’s systems and those provided by other manufacturers must be used alongside photomasks to manufacture semiconductors, providing a growth opportunity for Photronics. Despite slowing sales in the semiconductor industry, Photronics’ focus on profit margin improvements has set it up for success. Revenue in the first quarter of 2024 is expected to be up 3% to 7% year over year, and adjusted EPS is expected to rise 13% to 33%. Two growth trends driving Photronics’ financial expectations are the adoption of more advanced chipmaking and high-end display technology.

The semiconductor industry slump of the last year and a half has not greatly affected Photronics, which could make it a value buy for investors. Given that Photronics relies on companies installing new lithography equipment for its growth, its shares currently trade for just shy of 16 times trailing-12-month earnings and under 12 times trailing-12-month free cash flow. For investors interested in a small, under-followed, and underappreciated business, Photronics stock could be a top pick.



Read more: Worried About Risks to ASML Stock in 2024? Don’t Overlook This Small-Cap Chip Stock.