ASML Holding NV (NASDAQ:ASML) will be reporting its fourth-quarter earnings on Jan. 24. Wall Street expects $5.27 in EPS and $7.53 billion in revenues as the company reports before market hours.

ASML is a semiconductor production equipment (SPE) manufacturer. It is known for being a leading supplier of photolithography equipment used in the semiconductor industry. The company specializes in producing advanced lithography machines. These play a crucial role in the production of integrated circuits (ICs) and other semiconductor devices.

The stock has gained just 14.60% over the past year. It has vastly underperforming SPE peers such as Applied Materials Inc (NASDAQ:AMAT) at 46.02%, Lam Research Corporation (NASDAQ:LRCX) a 69.07% and KLA Corp (NASDAQ:KLAC) at 45.64%.

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The ASML Analyst: Cantor Fitzgerald analyst C.J. Muse has an Overweight rating on the stock with a price target of €900 (~$977.23) a share. At the time of review, the stock traded at €745 (~$808.93), representing a 21% upside potential.

The ASML Thesis: ASML faced significant underperformance in 2023. This was a result of its orders and backlog reaching their peak in the third and fourth quarters of 2022, followed by a substantial decline in bookings throughout 2023.

This resulted in a 28% underperformance compared to the SOX index. However, the outlook for ASML stock is expected to reverse in 2024. This presents an attractive "FIFO" (First In, First Out) opportunity, as noted by Muse.

The reversal in ASML stock performance in 2024 that Muse believes will happen is based on the expected increase in ASML bookings in 2Q24. This should support the growth projected for 2025.

This growth is driven by:

• An upturn in spending on DRAM,
• Heightened demand from 3/2nm technologies featuring GAA/Backside Power
• Stronger-than-expected High NA tool demand.

Muse anticipates a rebound in ASML bookings by the second quarter of 2024.

Considering that ASML shares are currently trading at historical lows compared to its peers, Muse projects ASML to lead the SPE group in an upward trajectory.

For the other SPE companies (mentioned above), Muse sees the relatively high multiples for CY24 and the expectation of modest growth in WFE (wafer fabrication equipment) in 2024, as potential challenges.

The optimistic outlook includes above-consensus estimates for ASML throughout 2024. He projects €30.00 in EPS in CY25, surpassing consensus estimates of €26.55. If these expectations materialize, ASML is positioned to be the top-performing System-on-Chip Equipment (SPE) name in 2024.

ASML Price Action: ASML stock was trading at around €707.10 at Euronext. Its ADR was trading at $778.39 at the NASDAQ, at market close Tuesday.

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Courtesy: (c) ASML