One of the most attractive bargains in the tech sector these days is Netherlands-based chipmaking equipment specialist ASML (ASML -0.27%). At least, that's according to one analyst tracking the stock.
In early December, BNP Paribas Exane's Jakob Bluestone reinstated his coverage of the beaten-down stock with a very bullish recommendation and ambitious price target. This might look a bit too ambitious to some investors, but I think this fresh review of the company is realistic.
A fall from grace
ASML specializes in the precision lithography machines that essentially print chips; in fact, it's the sole business in the world providing these devices. As such, its client list reads like a Who's Who of chip industry heavyweights -- for instance, sector powerhouse Taiwan Semiconductor Manufacturing is a customer. That alone provides a solid foundation for ASML's business.
And, according to reports, Bluestone believes that the company will land at the upper end of the guidance it proffered for 2030. What's more, its revenue for that year should come in 6% higher than the current analyst consensus estimate. In his evaluation, if ASML maintains its current price-to-earnings ratio of 25, its stock price would double within four years.
ASML landed in the investor doghouse recently because management reduced the top end of its 2025 net sales guidance quite dramatically. This is due largely to various challenges in China, whose government could potentially engage in a trade tussle with the U.S. and/or Europe soon.
The company now expects to book 30 billion euros ($31.5 billion) to 35 billion euros ($36.8 billion) for the period. Previously, it was guiding for 30 billion euros to 40 billion euros ($42 billion).
Overblown fears
This feels to me more like a case of the market worrying about short-term headwinds than being encouraged by long-term -- and very strong -- tailwinds. We are at the dawn of the artificial intelligence (AI) era, and essential chipmaking equipment will be even more in demand around the globe. This stock is almost a no-brainer buy to me, and I think Bluestone's new take is spot-on.
