ASML (ASML:AMS) €671.20

Gain to date: 25.6%

We selected semiconductor equipment maker ASML (ASML:AMS) as one of our tips for 2023 based on its long-term track record of growing earnings, which we felt was not fully reflected in its valuation after a tough preceding 12-month period for the shares.

This confidence was underpinned by ASML’s innovative technology which reinforces a strong competitive position.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

Things have gone well. Expectations for semiconductor demand have ballooned thanks to the rapid developments in artificial intelligence and ASML has continued to churn out robust growth, helping the shares to reach 52-week highs of nearly €700.

In January 2023, the company reported a 28.6% increase in fourth quarter sales to €6.43 billion with a better-than-expected gross margin of 51.5%. Guidance suggested further improvement in margins and sales growth of 25% in 2023.

It followed up this bullish update with a better than expected first quarter though it did note some signs of caution amid its customers.

Recently, the Dutch government confirmed it will impose export controls on microchip manufacturing equipment to China in the face
of pressure from the US government. That affects ASML but it does not expect the measures to have a material impact on its short or longer-term outlook.

At its investor day in November 2022, the company announced a target to reach between €30 billion and €40 billion of revenues in 2025, or a 65% increase on 2022 taking the mid-point of the range, and between €44 billion and €60 billion of revenues in 2030 or almost three times 2022’s total, taking the top of the range.

WHAT SHOULD INVESTORS DO NOW?

While the Chinese export restrictions are a fresh complication for the business, we are reassured by the company’s statement and remain strong believers in its long-term potential, driven by several big technological themes. In our view the shares remain a buy.

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