Please ensure Javascript is enabled for purposes of website accessibility

Is This the Best Semiconductor Stock Right Now?

By Neil Rozenbaum – Jul 26, 2021 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASML's unique position in the semiconductor market makes it a must-have in a long-term portfolio.

This video will talk about another semiconductor player, and probably the most important, ASML (ASML -1.99%). We're going to have a look at its recent earnings report and what it's doing. This is the fourth semiconductor I've covered this month. We went over the comeback Intel is making, how AMD climbed the semiconductor ladder, and why Nvidia will join the trillion-dollar club

What is ASML?

iPhones have chips that are designed by Apple and manufactured by TSMC, which uses ASML's systems. So what do these machines actually do? 

Think of them as printers, very expensive printers. Each chip has many layers, and the EUV machine "prints" these layers. It takes around three to four months to build such a machine and about 100 or 150 people to assemble it and teach how it works. 

Earnings highlights

ASML reported €4.0 billion net sales and €1.0 billion net income in Q2 2021, with net sales now expected to grow by around 35% in 2021. Q2 gross margin of 50.9% and net bookings of €8.3 billion are more than double net sales for the quarter. ASML also announced a new share buyback program of up to €9 billion to be executed by December 31, 2023.

Pros and cons

ASML's main competitor is its own previous systems. If the new system is not significantly better, what's the point of upgrading? 

ASML also outsources a lot. So if one of its suppliers is not up for the job or has delays, that has negative effects on ASML and then on the rest of the industry. For example, the lenses and mirrors that ASML uses are from Carl Zeiss, and if that company can't deliver, ASML can't complete its machines.

Do watch the video below for the full insights. 

*Stock prices used were the closing prices of July 23, 2021. The video was published on July 25, 2021.

Neil Rozenbaum owns shares of Intel. The Motley Fool owns shares of and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends ASML Holding and Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long March 2023 $120 calls on Apple, short January 2023 $57.50 puts on Intel, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policyNeil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

ASML Holding Stock Quote
ASML Holding
ASML
$591.84 (-1.99%) $-12.01
Apple Stock Quote
Apple
AAPL
$148.11 (-1.96%) $-2.96
Taiwan Semiconductor Manufacturing Stock Quote
Taiwan Semiconductor Manufacturing
TSM
$81.40 (-0.69%) $0.57
Intel Stock Quote
Intel
INTC
$29.34 (-1.11%) $0.33
Nvidia Stock Quote
Nvidia
NVDA
$162.70 (-1.51%) $-2.49
Advanced Micro Devices Stock Quote
Advanced Micro Devices
AMD
$75.14 (-1.65%) $-1.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.