ASML STOCK ANALYSIS - 3X STOCK! My Price Target $1,783/share! - YouTube

Hello everyone, this is Victor here.  Welcome to the Intelligent Investor Channel  

where you will learn about stock investing  analysis and personal finance that  

will help you become a great investor. Since the pandemic that started in 2020,  

there has been an enormous demand for  microchips. Everyone is staying at home more,  

working from home, playing more video games,  upgrading their computers, investing more in CPUs  

and GPUs either for their work, for gaming, or for  crypto mining—all these factors have contributed  

to the enormous demand for semiconductor chips.  In fact, there is a huge shortage of chip supply  

right now. ASML Holding is one of the major  semiconductor companies that benefited the  

most from the enormous demand for semiconductor  chips. The company locates in the Netherlands,  

but the stock is traded in the US Nasdaq. ASML Holding is a near-monopoly. It makes  

deep-ultraviolet (DUV) lithography and  extreme-ultraviolet (EUV) lithography machines

used by all the major semiconductor  companies such as TSMC, Samsung,  

and Intel. In this video, I’m going to talk  about “Why I believe ASML Stock will grow  

2 to 3 times within the next 5 years by 2025.”  I am going to cover these topics in this video: 

ASML’s stock performance Stock valuation comparison 

1st long-term growth catalyst: near-monopoly  in DUV and EUV lithography systems 

2nd long-term growth catalyst: an enormous  demand for logic chips and memory chips 

3rd long-term growth catalyst: European Union,  China, and the US are investing billions in  

the semiconductor industry ASML’s risks to consider 

Key takeaways and my price targets for ASML If you like this video, smash the like button,  

subscribe, and turn on the notification  button. I will continue to make  

many excellent stock investing analysis and  personal finance videos that will help you become  

a great investor. Let’s start. In terms of stock performance,  

ASML performed very well in the past 5 years.  Here is a stock comparison between ASML and its  

two biggest competitors that also make lithography  systems: Canon Inc and Nikon Corp. Both of them  

are well-known public traded companies in Japan. In the past 6 months, ASML stock increased 58.53%  

compared with Canon’s 27.86% and Nikon’s  8.97%. In the past 1 year, ASML stock increased  

+87.28% compared with Canon’s minus 11.74% and  Nikon’s minus 23.08%. It gets worse if we look  

at their past 5 years’ stock performance because  ASML dominates the entire lithography market.  

In the past 5 years, ASML stock increased  547.21% compared with Canon’s negative 20.53%  

and Nikon’s negative 47.59%. ASML operates  in a market where the winner takes the most,  

if not all the market shares. Here is the catch. ASML is not a  

cheap stock. It is expensive compared with  other semiconductor companies, such as Applied  

Materials and Lam Research, in the US. I want to show you these stock valuation ratios  

from MorningStar. If you look at this table here,  you can see all the ratios, including trailing 12  

months P/E, forward P/E, price-to-earnings-growth  PEG ratio, and forward dividend yield. All these  

ratios show that ASML is the most expensive stock  compared with Applied Materials and Lam Research.  

To be fair, we also need to look at their growth  rates, because companies with higher growth rates  

generally have a higher price-to-earnings ratio.  For example, according to MorningStar’s data,  

ASML had the highest 3-year average  revenue growth rate and the highest  

3-year average net income growth rate compared  with Applied Materials and Lam Research.  

All these means that ASML stock is traded at  a huge premium (or you can say it’s likely  

overvalued now) because the company has a higher  growth rate than its peers. ASML is a large growth  

company, and it is not a value stock. Here are the  main catalysts that I believe will drive ASML’s  

long-term growth in the next 5 years. The first thing you should know is that  

ASML makes deep ultraviolet DUV lithography and  extreme ultraviolet EUV lithography machines  

that are used by all the major semiconductor  fabrication companies in the world—including TSMC,  

Samsung Foundry, and even Intel. All the largest  chip manufacturing companies in the world use  

ASML’s DUV and EUV lithography machines  to manufacture their 10nm, 7nm, 5nm,  

and the upcoming 3nm semiconductor chips. ASML’s  EUV lithography machine is the most important  

technology for TSMC, Samsung, and Intel, to  make chips smaller than 5nm, so Moore’s Law will  

continue. The famous Moore’s Law predicts that the  number of transistors on a microchip doubles every  

two years. This makes chips much cheaper while  making chip performance growing exponentially. 

Here is the important part about ASML’s  near-monopoly in EUV lithography machines. 

According to Mordor Intelligence, “The Extreme  Ultraviolet Lithography Market is highly  

consolidated as ASML is the only manufacturer of  lithography machines that use extreme ultraviolet  

light. The company manufactures and sells  its tools to some global semiconductor  

fabricators, including Intel, Samsung, and Taiwan  Semiconductor Manufacturing Company (TSMC). Almost  

25% of the company's revenues are generated by  sales of EUV lithography systems, which reflects  

the company's monopoly in the manufacturing and  commercialization of EUV lithography systems.” 

This is from The Economist: “How ASML became  chipmaking’s biggest monopoly.” You can see  

ASML dominates with the largest market  share in the lithography system compared  

with Canon and Nikon. The Article states  “With neither Canon nor Nikon pursuing EUV  

technology, investors have concluded that ASML  will enjoy its nanoscopic monopoly for a while.” 

This is the 2nd long-term growth catalyst for  ASML. There is an enormous demand for logic  

chips and memory chips now. For example, if you  look at ASML’s latest Q4 2020 earnings slide,  

you can see ASML’s total net sales have been  growing steadily in recent years. ASML’s  

current net sales growth is mainly driven by logic  chips. Logic chips are CPUs and GPUs from Intel,  

AMD, and Nvidia we use in our computers. Logic  chips also include Apple’s M1 chip and its A14  

Bionic chip in iPhone 12. Ram chips are memory  chips such as DRAM we use in our computers. Again,  

ASML does not manufacture all these chips.  ASML makes the DUV and EUV lithography  

machined used by TSMC, Samsung, and Intel. This is from the latest Q4 2020 earnings call,  

ASML’s CEO said: “Following a strong 2020,  

we currently expect another year of good  growth in revenue and profitability in 2021. 

In Logic, we expect another very healthy  year driven by a further broadening of  

the application space, fueled by the global  digital transition. Customers continue to see  

strong demand for advanced nodes, which includes  the secular growth drivers such as 5G, AI, and HPC  

(high-performance computing). And in addition and  also driven by the digital transformation, we are  

seeing a strengthening demand for the more mature  nodes, across a wide variety of markets such as  

consumer, automotive and industrial. While we are  still very early on in the year, we think that  

with these demand drivers on full throttle for  advanced as well as mature nodes, we expect Logic  

revenue to be up at least 10% from an already  very high number of EUR7.4 billion in 2020.” 

“With customers indicating stronger bit  growth this year for DRAM around 20% and  

for 3D-NAND around 30% to 35%, and taking into  account lithography tool utilization already at  

high levels, we expect the recovery in lithography  demand for memory to continue this -- through this  

year. Therefore, we expect Memory revenue to be up  around 20% this year from EUR2.9 billion in 2020.  

Although DRAM primarily uses Deep UV technology  today, we do expect our EUV shipments to DRAM  

customers to increase in the coming years.” Then, ASML CEO also said: 

“All in all, we started the year with robust  demand across the entire industry and across  

all geographical regions. This  should bode well for a double-digit  

upside from our 2020 revenue numbers.” This means ASML CEO is expecting that  

ASML will again have a double-digit growth in  2021—which is much higher than most semiconductor  

companies that have single-digit growth. Here is one interesting thing you should  

know about ASML’s EUV lithography system, which  I believe will drive ASML’s long-term growth  

for the next 5 to 10 years as TSMC, Samsung and  Intel move to very advanced nodes such as 5nm,  

3nm, 2nm, and 1.4nm. In 2020, ASML sold “31 EUV  systems with a revenue of $4.5 billion Euro for  

the year.” This means each ASML EUV lithography  system is sold for approx. $145 million Euro! That  

is an enormous amount. Most smaller semiconductor  companies cannot afford to pay $145 million  

Euro for each EUV lithography system. Only the  largest semiconductor companies in the world can  

afford it. This is one of the main reasons ASML  only has several major customers. According to  

ASML’s 2020 Annual Report, ASML said it has “three  largest customers accounted for 80.1% of accounts  

receivable and finance receivables as of Dec  31, 2020.” ASML’s largest customer accounted for  

31.4% of total net sales in 2020. ASML’s 3  largest customers are TSMC, Samsung, and Intel. 

ASML’s long-term growth will be driven by the  increasing demand for DUV and EUV lithography  

machines. As long as there is an increasing  demand for CPUs, GPUs, RAMs, 5G networks,  

smartphones, electric vehicles,  internal-combustion engine cars,  

and thousands of other computing applications,  semiconductor companies (such as TSMC, Samsung,  

and Intel) will continue to buy more DUV and  EUV lithography systems from ASML. Because of  

the increasing demand for manufacturing chips, you  can see ASML’s lithography systems sold in units  

were steadily increasing between 2016 and 2020. This is from ASML’s latest Q4 2020 earnings  

release, you can see ASML’s net sales grew at a  compound annual growth rate CAGR of 19.1% between  

2016 and 2020. Its net income grew at a CAGR of  22.90% between 2016 and 2020. Its earnings per  

share grew a CAGR of 23.54% between 2016 and 2020. Here is the 3rd catalyst that I believe will drive  

ASML’s long-term growth. Right now, there is  an enormous shortage of chips (caused by the  

pandemic) that is impacting all the car makers  such as GM and Ford, chip designers such as AMD  

and Nvidia, and all the tech companies such as  Apple, Microsoft, and Sony. TSMC is planning  

to invest $12 billion in a fabrication plant  in Arizona US. Samsung is planning to invest  

more than $10 billion to build its own fabrication  plant to compete with TSMC in the US. Last year,  

the European Union announced that “they agreed to  allocate $145 billion Euro” for digital projects.  

This is to build semiconductor fabrication plants  and technologies in other to catch up to the US  

and Asia. China is also investing billions in  semiconductor companies now. This is a part of  

China’s $1.4 trillion five-year economic plan in  other to overtake the US in the leading-edge tech  

such as 5G networks, autonomous vehicles, and now  semiconductors. I believe all these investments  

in semiconductor tech in the US, Europe, and  China will continue to benefit ASML because  

the major semiconductor companies will need to  buy DUV and EUV lithography machines from ASML  

if they want to increase their wafer capacity  to manufacture chips—especially the leading-edge  

7nm, 5nm, and upcoming 3nm chips. Before investing in anything,  

we also need to consider the risks. For ASML, I  believe there are three risks we should consider: 

The first risk is that ASML’s revenue is  concentrated on very few customers. ASML’s  

three largest customers accounted for the  company’s 80.1% of accounts receivable and  

finance receivable as of Dec 31, 2020. If there  is a decrease in demand for microchips around  

the world, ASML’s three largest customers (TSMC,  Samsung, and Intel) would not buy as many DUV and  

EUV lithography systems from ASML as before. The second risk is political risk. If the US-China  

tension escalates under the Biden administration,  there could more restrictions on ASML exporting  

lithography systems to China. In 2020, 18% of  ASML’s net system sales came from China, up from  

12% in 2019. For example, according to Bloomberg,  the Dutch government, under the pressure from  

the US, restricted ASML from selling the most  advanced EUV lithography systems to China in 2020. 

The third risk is that ASML stock is likely  overvalued or traded at a premium now compared  

with Applied Materials and Lam Research,  But again, to be fair, ASML’s revenue and  

net profit growth are expected to be higher than  most semiconductor companies in the next 5 years. 

[Key takeaways and my price targets for ASML] In summary, I like ASML’s long-term growth  

prospects. I like its near-monopoly in DUV  and EUV lithography machines that are used by  

all the major semiconductor companies around the  world. Even if ASML stock is traded at a premium  

now, I invested in ASML stock about 1 week before  making this video. I am planning to invest in ASML  

for many years. I only like to invest in great  companies I like the most for the long-term. 

In terms of price target, as a reference,  ASML’s earnings-per-share grew at a CAGR of  

23.54% between 2016 and 2020, and the stock  increased 547% during the same period. I do not  

expect ASML stock to grow at the same high growth  rate as before. But If ASML’s earnings-per-share  

continues to grow at a CAGR rate of 23% for the  next five years, I believe the stock will triple  

to around $1,783/share (this is my optimistic case  scenario). But if ASML’s earnings-per-share grows  

at a lower CAGR rate of 15% for the next five  years, I believe the stock will double to around  

$1,188/share (this is my conservative case  scenario). Again, all these estimates are only  

my opinions, and they are only for informational  and entertainment purposes only. You need to do  

your own research before investing in anything. If you like this video, smash the like button,  

subscribe, and turn on the notification button.  I will continue to make many excellent stock  

investing analysis videos that will help you  become a great investor. Thank you for watching.  

This is Victor from the Intelligent Investor  Channel. I will see you in my next video.