ASML Holding is a Dutch company and currently the largest supplier of tools used to manufacture semiconductors. The company manufactures machines for the production of integrated circuits, such as CPUs, DRAM memory and flash memory.

ASML reported 3rd quarter results yesterday. The results and outlook provide further evidence that capital investment in semiconductor manufacturing is strong. Third quarter revenue was better than the highest industry estimate, however, guidance for the 4th quarter was reduced. The two quarters balance each other, providing confidence for a revenue ‘beat’ for the 2017 financial year.

Management also indicated that, while reliable indications on demand in 2018 are premature, the memory market appears to be balanced and price pressures from oversupply are not anticipated. ASML plans to ship 20 EUV tools in 2018 and a further 30 machines in 2019. ASML is targeting €9 earnings per share in 2020. This would imply a market price that exceeds €250 per share within this decade. Yesterday’s results support this projection.

Meanwhile other analyst had the following to say about the results:


• 3Q beat is due to a pull-in of an EUV machine from 4Q, with guidance for 4Q accordingly below estimates by about one machine
• Shares not likely to gain given lack of new EUV order, recent share price run, comparison with Lam Research’s strong beat overnight
• Even so, path to EUV remains strong, with increasingly strong industry fundamentals
• Rating overweight


• Guidance for 4Q revenue is “cautious,” overall FY should still top current expectations
• Management confidence regarding 2018 demand, positive environment in all product categories
• Rating buy


• Results strong, upside mainly driven by memory chip segment
• Positive news was that ASML shipped the indicated 3 EUV systems in 3Q and confirmed guidance for 12 EUV shipments in 2017
• Expects additional orders for EUV systems in the coming months
• Rating hold


• Sales guidance for 4Q is below estimates, with the main reason being a drop in underlying DUV system sales
• DRAM-related demand is potentially peaking this year and sales to Intel are expected to normalise after a sharp spike in 3Q
• ASML expected to enter 2018 with a lower DUV run-rate, remain “cautious”
• Rating sell


• Weaker guidance and capacity constraints impacting EUV for 2019 may limit scope for material earnings upgrades following results
• Lack of new EUV order not a cause for concern, as timing of orders “can prove lumpy”
• Underlying dynamics in EUV appear robust, although a 30 unit number for 2019 is at the bottom end of the 30-35 units mentioned on the 2Q results call
• Note management comments on trying to work with suppliers to increase 2019 capacity amid higher demand
• Rating buy

This article was issued by Antoine Briffa, investment manager at Calamatta Cuschieri. For more information visit, The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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