Does ASML’s November Rally Have Staying Power?

Share buybacks, capacity expansion, takeover plans and semiconductor trade skirmishes are factors in the recent bull run at the Netherlands-based chip equipment maker. ASML (NASDAQ:ASML).



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The shares soared 17.82% last week and 52.41% last month, and are currently trading 24% above their 50-day moving average.

The uptrend began in October, on the heels of ASML’s better-than-expected third-quarter results. Following that report, several analysts upgraded the stock or raised their price targets, as you can see with MarketBeat analyst data.

The consensus price target is now $797.29, a 38.25% upside potential. The positive news was cited as a catalyst for raising the price target. The analyst consensus rating on the stock is a ‘buy’, but that should not be taken as a recommendation. It is always important to evaluate any stock within the parameters of your risk tolerance, existing holdings, and financial goals.

That being said, ASML is showing unusual strength. Other manufacturers of large chipping gears, such as Applied Materials (NASDAQ: AMAT) Y Lam Research (NASDAQ:LRCX) It has also rallied recently, but has been trending lower over the past week, while ASML has held on to its gains.

The pace of the rally picked up

ASML’s rally gathered steam on November 10, when the shares rose 14.57% at more than double average turnover. The company held an investor day, where it announced several initiatives and updates, including:

  • Despite an uncertain macro environment, the company expects long-term demand and capacity to show healthy growth.
  • He expects industry developments and innovation to drive growth in the semiconductor markets.
  • The company plans to increase its capacity to meet future demand.

CEO Peter Wennink said that even if sales in China were excluded, that would not affect the company’s growth forecasts. His comments addressed concerns about US restrictions on chipmaking equipment to China.

ASML has also instituted a new share buyback program valued at around $12.2 billion, which will run until December 2025.

ASML is part of the chip equipment industry. It makes extreme ultraviolet lithography systems, which it sells to semiconductor manufacturers. It has carved out a niche in that category, giving it a commanding place in the broader semiconductor business.

The company’s sales and profits fell in 2022 as chipmakers cut capital spending plans. For the full year, Wall Street expects net income of $14.14 per share, a decrease of 13%. However, it is expected to rise 34% next year, to $18.92 per share.

Getting ahead of the sights

MarketBeat’s earnings data for ASML shows the company has beaten earnings views in each of the past eight quarters.

Recent price action has been encouraging, although the stock has underperformed the broader market over the past 12 months. A weekly chart offers the clearest indication of the company’s long downtrend and where it is currently trading, relative to its late-2021 highs.

Shares fell back to a 2-1/2-year low in October, shortly before the earnings release set the tone for another rally. The stock has risen and is now back at its May 2022 level.

ASML has characteristics of a growth stock, even in the current market downturn. For example, your price-earnings ratio is 39, which could be considered high.

Admittedly, it has a lot of ground to catch up before recapturing its September 2021 high of $895.93, but with this month’s price action, shares have moved past a short-term consolidation that began in August. ASML is now trading above several key moving averages. In a potentially encouraging sign, the short-term averages are rising as the long-term 200-day line turns lower.

That is a positive trend, and the stock may head for a bullish crossover in the coming sessions as the 50-day line rises above the 200-day line. That could be an indication that the current uptrend has enough momentum to lift shares further, as analysts expect.
Does ASML's November Rally Have Staying Power?

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