ASML’s Sharply Falling Stock
ASML Holding, a leading Dutch chipmaker, experienced its steepest weekly drop since 2002, plummeting by 17% last week. This significant decline followed news that the US might impose stricter export restrictions on advanced chips to China, including those from non-US firms using American technology. This potential regulation could affect ASML and Japan’s Tokyo Electron significantly.
Market Reaction and Financial Impact
The news led to a dramatic 11% drop in ASML’s stock price on July 17, marking its largest single-day fall since March 2020. ASML’s market value fell from €400 billion to €326 billion, pushing it to the third position among Europe’s largest companies, behind Louis Vuitton Moet Hennessy. Despite strong second-quarter earnings, the stock selloff overshadowed these positive results.
Bank of America’s Optimistic Outlook
Bank of America analysts have assessed the situation and believe the potential restrictions may have a manageable impact on ASML. They estimate that a ban on servicing equipment in China might cut ASML’s revenue by 3% or less, with restrictions affecting specific customers possibly reducing revenue by about 1%. For a company that generated €27 billion in revenue last year, this equates to a potential revenue loss between €270 million and €770 million.
Strategic Buying Opportunity
Despite the recent turmoil, Bank of America views ASML as a strong investment. They have maintained a price target of €1,302 for ASML, suggesting a 60% upside from the recent closing price. Analysts consider the current downturn a strategic buying opportunity, especially ahead of ASML’s November Capital Markets Day, where the company is expected to increase its revenue targets for 2030.
Future Prospects and Investment Considerations
ASML’s role in the semiconductor industry and its ongoing investment in R&D keep it at the cutting edge of technology. While geopolitical tensions and regulatory uncertainties may introduce short-term volatility, ASML’s financial health and innovation leadership make it a compelling investment despite recent market setbacks.
SOURCE: Ref Image from Reuters
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