ASML Stock Surges as Q3 Earnings Loom Amidst AI Hype and Revenue Hopes

Recent weeks have seen a notable rise in ASML's stock, with a 3.76% increase on October 14, marking a two-day gain of 4.59%. This surge reflects growing optimism as the company nears its Q3 earnings report on October 16, where market expectations forecast a 7% year-over-year revenue growth, reaching €7.1 billion.

ASML's cutting-edge lithography machines are critical to semiconductor production, positioning the company as a key player in the AI surge. However, despite a solid start to 2023, their revenue has not met previous year's levels. In Q2, revenues were reported at €6.24 billion, a drop from €6.9 billion year-over-year, with net profits decreasing to €1.58 billion from last year's €1.94 billion.

Expectations are high for ASML to rebound in the latter half of the year, with analysts forecasting a robust 24% quarter-over-quarter revenue increase in Q4 to €8.8 billion. The company's technological leadership poises it to benefit from enduring trends like AI, though challenges faced by major customers could affect future growth.

Morningstar analysts maintain a positive long-term outlook for ASML, predicting 2025 fiscal year revenues to reach €36.7 billion, which could comfortably position the company within their guidance range. ASML's presence and anticipated recovery in the Chinese market add further optimism, although the exact timing remains uncertain.

Investors are closely monitoring the implications of production setbacks at Intel, ASML's potential third-largest customer, which recently postponed plans for a wafer fab in Germany. Despite these risks, long-term growth prospects remain strong, as alternative customers may capitalize on any further delays from Intel.

The recent stock pullback is viewed by some as a buying opportunity, with Morningstar setting a fair value price target of €900, underlining ASML's pivotal role and continuing strength in the semiconductor industry.