The semiconductor industry has been abuzz with stock split news in recent months. In June 2024, chip giant Nvidia (NVDA) completed a 10-for-1 stock split following its shares surging over 850% since November 2022 amid the artificial intelligence (AI) boom. Lam Research (LRCX), priced at over $1,000 per share, has a 10-for-1 split of its own coming down the pike - and not to be outdone, Broadcom (AVGO) also announced a 10-for-1 split, set to take place July 15 after its stock price topped $1,700 on the back of strong demand for its AI chips.
With some of the biggest semiconductor stocks out there taking steps to make their shares more accessible to retail investors, attention is now turning to who could be next. One strong contender is ASML Holding (ASML), the Dutch supplier of lithography equipment that plays a critical role in enabling cutting-edge chip manufacturing.
ASML recently surpassed LVMH (LVMUY) to become the second-largest listed company in Europe, with a market value of $415 billion. Given its high share price, which currently exceeds $1,000, and its critical role in the semiconductor supply chain, ASML could be a strong candidate for a potential stock split. While it wouldn't represent a material change to ASML's fundamentals, this move could make its shares more accessible to retail investors and enhance liquidity, similar to the strategies employed by Nvidia and Broadcom.
ASML Stock's Recent Performance
ASML is a big deal in the semiconductor world, since their EUV lithography machines are essential for making advanced chips, like those used in AI. Their position in the market has been described as a near-monopoly \- so it's no surprise their stock has been on a tear, up over 3,000% since their last stock split, way back in 2007. (A reverse split, for the record!)
More recently, ASML stock is outperforming the broader market with a gain of 48% over the last 52 weeks, and 41.2% on a YTD basis.
ASML is also known for its solid dividend payouts. The most recent dividend was $1.87 per share, paid to shareholders on May 7. The forward annual dividend is $7.49 per share, yielding about 0.7%.
Valued at 51 times forward earnings, ASML stock isn't particularly cheap on an absolute or a relative basis. That multiple is higher than the tech industry average of around 23x and ASML's own historical average of 39x.
That said, while not dirt-cheap, these multiples seem acceptable for a highly profitable, “wide moat” company with durable competitive advantages operating in secular growth markets like AI and advanced semiconductors.
ASML Beats Q1 Earnings Estimates
ASML released its first-quarter 2024 results on April 17, reporting earnings per share (EPS) of $3.38, which beat analysts' expectations of $2.84. However, revenue of $5.74 billion was down 21.5% from the same quarter the previous year, and fell short of consensus forecasts. Net bookings were down 3.7% year over year, and fell more than 60% sequentially from Q4 levels.
However, ASML maintained its full-year outlook, citing expectations for a stronger second half as the broader semiconductor industry recovers. They ended Q1 with a massive $38 billion order backlog, providing solid visibility for the coming quarters.
On average, ASML is projected to grow earnings to $31.19 per share in fiscal 2025, while revenue is projected to surge to $38.93 billion.
The Fundamentals Fueling ASML's Growth
This year, ASML is set to ship its $380 million high-NA extreme ultraviolet (EUV) chipmaking machine to two of its biggest customers, Taiwan Semiconductor (TSM) and Intel (INTC). This high-NA EUV machine is a game-changer in lithography technology, enabling the production of even more advanced semiconductor chips.
Beyond these shipments, ASML is deeply involved in collaborative efforts to push semiconductor technology forward. ASML, in collaboration with Belgium's imec, has opened a state-of-the-art lab in the Netherlands to support the development and testing of the latest high-NA EUV lithography equipment. Several EU programs and the Belgian government are providing 1.4 billion euros in funding, with industry players, including ASML, chipping in 1.1 billion euros. This facility houses the first prototype high-NA EUV scanner and associated tools, a crucial step in preparing for high-volume manufacturing.
Separately, the city council of Eindhoven, Netherlands, recently approved an initial agreement with ASML to plan a major expansion in the city's north. This expansion is part of ASML's broader strategy to support its business growth and maintain its position as a key player in the global semiconductor market.
Analyst Insights: What the Future Holds for ASML Stock
Analysts are overwhelmingly bullish on ASML's prospects, with a consensus rating of "Strong Buy." Out of 18 analysts, 15 suggest a “Strong Buy,” and 3 recommend “Hold.”
The mean target price for ASML is $1,081.86, representing a potential upside of only about 1.3% to current levels.
The Bottom Line on ASML Stock
So, could ASML be the next big semiconductor stock to split after Nvidia and Broadcom? Given its sky-high share price and its pivotal role in the semiconductor industry, it certainly seems like a strong candidate. A stock split could make ASML's shares more accessible to everyday investors, and potentially boost trading activity.
However, whether or not ASML will actually go ahead with a split is pure speculation at this point - so it's best for prospective investors to consider the company's current market position and fundamental prospects before picking up shares. And for now, despite expectations for a relatively tepid turnaround year in 2024, it looks like the company's longer-term growth prospects could be compelling for investors still seeking that AI edge in their portfolios.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
