ASML underperforms tech sector due to weak growth potential and geopolitical risks

by MarketNewsData

From Nasdaq: 2025-01-16 12:11:00

ASML Holding has underperformed the tech sector with a modest 2.1% rise in stock compared to Computer and Technology sector’s 29.8% and S&P 500’s 24.4% climb. Industry leaders like NVIDIA, Broadcom, and Marvell Technology have surged significantly, raising concerns about ASML’s growth potential. Is it time to sell this underperforming chip giant?

ASML’s third-quarter results show growth in net sales and net income, but muted guidance for the fourth quarter raises concerns. Margin challenges due to cost pressures and weaker order intake in 2024 add to investor worries. Analysts are revising earnings estimates downward, signaling a lack of optimism about ASML’s growth trajectory.

ASML’s High NA EUV technology is key for chip manufacturing advancements, but its high costs strain profitability. Management expects a 3.5% margin dilution in the fourth quarter due to production costs. Geopolitical risks, including U.S. export restrictions and macroeconomic challenges, amplify uncertainty for ASML. The stock’s premium valuation limits its immediate upside potential.

Geopolitical tensions and macroeconomic challenges pose threats to ASML’s revenue streams. The company’s heavy reliance on China for lithography shipments could be impacted by escalating export restrictions. ASML faces challenges in a semiconductor industry contending with post-pandemic demand volatility. The stock’s premium valuation raises concerns about paying a premium for uncertainty.

ASML remains pricey with a high forward P/E ratio and a Zacks Value Style Score of D. Investors may consider selling ASML shares due to its stretched valuation and uncertain near-term outlook. While the company’s long-term leadership in semiconductor technology is acknowledged, current challenges make it less appealing in today’s market. ASML currently carries a Zacks Rank #4 (Sell).



Read more at Nasdaq: ASML Stock Underperforms Tech Sector in a Year: Time to Let Go?

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