Analyst’s “contrarian” view: ASML set to outperform

Apr. 23, 2008 – A pending memory recovery later this year and more migrations to smaller technology nodes will spur another round of immersion tool orders for ASML, according to an analysis from FBR Research, which is reiterating its “Outperform” rating on the stock.

ASML just posted slowing 1Q08 profits (€145.1M, -28% Q-Q, -5% Y-Y) and sales (€919.2M, -4% Q-Q, -3% Y-Y). Backlog also was lower (€1.17B, -31% Q-Q), with demand from logic customers offset by delayed ramps of two new flash memory fabs and a DRAM fab extension, according to the company in a statement.

FBR analyst Mehdi Hosseini writes in a research note that he expects memory fundamentals to improve later this year, and combined with customers’ migration to smaller technology nodes to help lower unit costs should give ASML a boost in immersion bookings, with shipments sometime in CY09. He expects the company to ship 44 immersion tools this year (it shipped 14 in 1Q08), and a FY08 total new/used shipments of 160/17 and average ASPs of $18.5M/$4.1M. He forecasts an increase to 189 new/18 used in FY09, with average ASPs increasing to $20.8M/$4.5M.

“We believe that only a few names will benefit the most from the next up-swing in frontend capital spending,” he writes, and ASML “is the only name with exposure” to a segment of semiconductor manufacturing that requires some equipment upgrades, i.e. dry litho to immersion.

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