Shares of top semiconductor manufacturing-equipment company ASML Holding (ASML 4.05%) are up an incredible 220% over the last five years, but the road has gotten bumpy in the last year or so. The chip market is presently near the bottom of a downturn, driven by evaporating pandemic-era sales of PCs and smartphones. ASML stock is down nearly 30% from its all-time high reached near the end of 2021. 

Companies like ASML that make specialized chipmaking equipment are in a unique position, though. While the semiconductor market works through its slump, fabs (the facilities that make chips) are retooling for the next wave of advanced chips in the years to come.

ASML is therefore forecasting record sales for 2023. Does that make the stock a buy right now? 

ASML's epic 2023 roadmap

Though chip sales are dragging down financial results for chip companies this year, ASML's downturn was actually in 2022. The company's capacity to get photolithography equipment -- the tools used to make the finest of microscopic features on silicon wafers, which eventually get cut into advanced chips -- was constrained last year. This was due to the chip shortage of late 2020 to mid-2022, as well as supply chain challenges from the early pandemic.

ASML Revenue (TTM) Chart

Data by YCharts.

Despite the company's limited ability to ship machines, including its most advanced EUV (extreme ultraviolet) lithography machines, orders from its chip fab customers kept rolling in. ASML entered 2023 with a record backlog of orders worth over 40 billion euros. This led ASML management to predict revenue would grow "at least 25%" in 2023, which would tally up to record annual revenue of at least 26.5 billion euros, based on 2022 numbers.  

First quarter 2023 revenue of 6.75 billion euros (which is 27 billion euros on an annualized basis) keeps ASML on track to reach its stated goal for 2023. Management left guidance for growth and slight profit margin expansion unchanged.

Reports from top customer Taiwan Semiconductor Manufacturing (TSM 0.99%) underscores the certainty of ASML's growth forecast. TSMC said it will continue to spend plenty of money on chipmaking equipment this year (at least $32 billion worth, to be exact), even as it works through lower chip manufacturing demand.

The green light on extreme ultraviolet light, but for how long?

There was one area of potential concern at ASML, though. Remember that more than 40 billion euro backlog? By the end of Q1 2023, it had been reduced to 38.9 billion euros. What gives?  

Basically, with global economic uncertainty riding high right now, many customers are holding off on placing more orders for ASML's very expensive machines. How expensive? An EUV machine's average selling price was 170 million euros in Q1 2023. The good news, though, is that current orders aren't being canceled. Because of that, ASML's existing backlog will keep it in growth mode through at least the first half of 2024 -- assuming all customers accept those orders and make payment.

But then things get a bit cloudier in the second half of 2024. CEO Peter Wennink expressed confidence that chip fab customers will need more machines based on their chip technology roadmaps. But the timing of when those orders will be placed -- say, between now and June 2024 -- remains uncertain.

Despite mid-term uncertainty, is ASML stock a buy?

Given the question marks regarding the pace of EUV and other lithography machine orders for 2024, some investors may pause before buying ASML stock right now. After all, the stock trades for a lofty 35 times trailing-12-month earnings per share, or 29 times free cash flow. That's a premium valuation to peers like Applied Materials (AMAT 1.99%), which provide some of the ancillary tools needed to put ASML's equipment into operation in the first place.  

That said, if ASML deserves that premium if it can grow by an average double-digit percentage through 2030. (Yes, 2030 -- that's how far-sighted management thinks its customer pipeline of photolithography orders are.)

I'm more than happy to hold onto my current position. But I'm waiting before buying any more right now. I think peers like Applied Materials offer a better value at the moment.