ASML Shares, IBD Shares of the Day, Earnings Gains, Guidance

Semiconductor equipment manufacturer ASML (ASML) is the IBD share of the day after the company easily beat Wall Street’s Q1 targets and led higher. ASML stock jumped to the news.

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The Dutch company earned the equivalent of $ 3.87 per share on revenues of $ 5.26 billion in the quarter ended March. Wall Street had forecast earnings of $ 3.14 per share on revenues of $ 4.86 billion, according to S&P Global Market Intelligence. ASML reports financial results in euros. During the same period last year, ASML earned the equivalent of $ 1.02 per share on sales of $ 2.66 billion.

ASML and other semiconductor equipment suppliers are getting a rise in sales from chip makers. The industry is investing in new capacity to meet rising demand.

The company’s gross profit margin in the first quarter was 53.9%, well above the expectation of 50.5%.

Chip shortages A tailwind for ASML shares

“Compared to three months ago, we are seeing a significant increase in demand in all market segments and our product portfolio,” CEO Peter Wennink said in a press release on Wednesday. “Building the digital infrastructure with secular growth engines such as 5G, AI and powerful computing solutions is fueling the demand for advanced and mature nodes in logic (chips) and memory.”

ASML now expects revenue growth of about 30% in 2021, Wennink said. The company previously led “double digit” growth for the year.

Important customers such as Semiconductor manufacturing in Taiwan (TSM), Samsung and Intel (INTC) have increased their capital investment plans in recent weeks in response to increased demand for chips and shortages.

ASML, based in the Netherlands, makes advanced lithography equipment for etching small circuits on semiconductors.

CFRA Research analyst Jun Zhang Tan upgraded ASML stock on Wednesday to buy off hold. He also raised his 12-month price target on his US stocks from 540 to 745.

“While the global semiconductor shortage was widely expected to benefit ASML, the strength of the benefit far outweighs market expectations,” Tan said in a note to customers.

ASML’s bookings are showing “early signs of an order tsunami,” said Robert Maire, president of Semiconductor Advisors, in his note to clients.

ASML shares are on IBD watchlists

In today’s stock market, ASML stock rose 6.3% to close at 655.49.

On April 5, the ASML stock reached a record high of 653. The ASML stock is on the IBD 50 list of top performing growth stocks as well as on IBD’s Global Leaders list.

In a bullish sign, ASML stock found support at the 21-day exponential moving average line before the earnings report. It is in a period of consolidation, but has yet to form a solid foundation, according to IBD’s trading guidelines.

According to IBD Stock Checkup, ASML ranks first in IBD’s Electronics-Semiconductor Equipment industry group. It shares a best possible IBD Composite Rating of 99 with six other chip-gear stocks, including Applied materials (AMAT) and Lam Research (LRCX).

The semiconductor equipment group is ranked 14th out of 197 industry groups that IBD follows. It helps to choose highly valued stocks from leading industry groups in a confirmed upward trend in the stock market. That generally increases your chances of making a profit in growth stocks.

ASML stock has an IBD Relative Strength Rating of 83 out of 99, which means that it has outperformed 83% of the stock in the past 12 months.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories about consumer technology, software and semiconductor stocks.

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