The ASML stock price has crashed hard in the past few months as concerns about the artificial intelligence industry remained. After peaking at $1,104 on July 11, the stock crashed by almost 35% to the current $732. So, is the ASML stock a good buy?
ASML has been a growth story
ASML is one of the most important companies globally because of its services and products.
It is a near-monopoly that provides products to companies in the semiconductor manufacturing industry like Intel, GlobalFoundries, and Taiwan Semiconductor.
Its key products are the extreme ultraviolet (EUV) lithography machines, deep ultraviolet (DUV) systems, refurbished systems, computational lithography, and metrology and inspection systems.
These products are widely used in all fabrication companies in places like the United States, China, and Germany.
Notably, ASML does not have a big mainstream competitor capable of developing these solutions. Canon, a Japanese company, is aiming to become one of its top competitors in the lithography industry.
ASML’s business has boomed in the past few years, helped by the ongoing tailwinds on artificial intelligence and other technologies like cloud computing. It has also benefited from the growth of fabrications, especially in the US, which passed the CHIPS act under Biden.
This growth has pushed its annual revenue from $13.2 billion in 2019 to over $30 billion in the last financial year.
The company has, however, faced some headwinds. For example, as a critical company, it has faced limits on who it can sell its technology to. In particular, it has been barred from selling some of its most advanced lithography machines to Chinese companies.
ASML earnings ahead
The next important catalyst for the ASML share price will be its earnings, which will come out on Thursday.
The most recent numbers showed that ASML’s revenue rose slightly to €7.5 billion as it sold 106 new lithography systems, up from 89 in the previous quarter. Its stock dropped by 15% after these earnings when it predicted that its gross margins dropped from 51.5% to 50.8%.
The company’s guidance was that its fourth-quarter results will be between €8.8 billion and €9.2 billion. Its gross margins are expected to be between 49% and 50%, indicating they are still under pressure.
ASML stock will also react to the ongoing DeepSeek hype. DeepSeek is a new artificial intelligence model that has substantially changed the AI industry due to its advancement and lower deployment costs.
Analysts expect that its business will disrupt the industry, and potentially lead to more business opportunity for companies like ASML.
They are also highly upbeat about the ASML stock price. The average stock target is $927, much higher than the current $732.
ASML stock price forecast
The daily chart shows that the ASML share price peaked at $1,104 in July last year and then plunged to a low of $645. It has remained below the 50-day moving average and moved to the 50% Fibonacci Retracement point at $730.
The stock has formed a bearish flag chart pattern, a popular risky sign. It has also formed what looks like a rising wedge pattern and a series of lower lows and lower highs.
Therefore, the stock will likely have a bearish breakdown after earnings, with the next point to watch being at $645. A move above the resistance at $800 will invalidate the bearish view.
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