ASML (AS:) Emerges as Top Semiconductor Stock Pick for Year-End Gains, Mizuho Analysts Say
In a recent note, Mizuho analysts have shifted their favorite semiconductor stock from TSMC to ASML (AS:), highlighting a compelling risk-reward opportunity as the stock has underperformed its peers. While TSMC shares have risen 16% in September, ASML has lagged significantly, up just 0.8% during the same period.
Mizuho analysts now see ASML as their top pick for year-end gains, presenting it as an attractive long-term investment. They believe that ASML's underperformance relative to the broader semiconductor sector and major players like Nvidia (NASDAQ:) and TSMC presents a compelling risk-reward opportunity with limited downside.
Market sentiment around ASML has been weighed down by concerns over Intel (NASDAQ:) capital expenditure cuts and risks related to China restrictions. However, Mizuho believes this presents a buying opportunity, as the negative sentiment is already factored into the stock's price.
Looking ahead, Mizuho expects ASML's third-quarter results in October to be stable and views the company's upcoming investor day on November 14 as a key event. They anticipate that ASML management will not lower its long-term revenue targets for 2025, which are currently estimated between €30-40 billion.
The analysts also see ASML as well-positioned for a rebound in lithography tool spending, forecasting that the company's valuation could expand back to a 30-32 forward P/E range. With EPS estimates for 2024 already coming down, Mizuho sees limited downside and significant potential for upside.
In conclusion, Mizuho analysts believe that ASML presents a strong investment opportunity with the potential for year-end gains. Despite concerns in the market, they see ASML as a top pick in the semiconductor sector, with a compelling risk-reward profile and limited downside. Investors may want to consider adding ASML to their portfolios for potential long-term growth.
