Semiconductor equipment company ASML Holding (ASML 2.61%) saw its order momentum continue in the fourth quarter. While the stock didn't gain much traction from its earnings report, it is still up more than 30% in January and has more than doubled over the past year, as of this writing.
Given the stock's strong performance to start the year, let's take a closer look at its latest results and prospects to determine whether or not it's too late to buy shares of ASML.
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Strong order outlook
ASML is one of the most important companies in the semiconductor value chain. It has a monopoly on extreme ultraviolet (EUV) lithography technology, which is the manufacturing process used to make advanced chips, such as graphics processing units (GPUs) and high bandwidth memory (HBM). As foundries and memory makers rush to increase capacity due to the artificial intelligence (AI) infrastructure boom, the company is seeing strong order growth.
For the quarter, its revenue rose 5% higher to 9.7 billion euros ($11.6 billion) and came in toward the high end of the company's guidance range of 9.2 billion to 9.8 billion euros ($11 billion to $11.7 billion). Its equipment sales rose 7% year over year to 7.6 billion euros ($9.1 billion), while its service revenue slipped 1% to 2.1 billion euros ($2.5 billion).
NASDAQ: ASML
Key Data Points
During the quarter, the company sold 94 new lithography systems and eight used systems compared to 119 new and 13 used systems a year earlier. Approximately 48% of its sales came from higher-priced EUV technology versus 42% a year ago, while 36% of its sales were to China versus 27% year ago.
The biggest news out of the quarter, though, was ASML's orders. Its net bookings soared from 5.4 billion euros ($6.4 billion) in Q3 to $13.2 billion euros ($15.8 billion). That was way ahead of the 6.2 billion euros ($7.4 billion) in net bookings that analysts were expecting, according to Visible Alpha.
Looking ahead, the company forecast Q1 revenue to be between 8.2 billion euros ($9.8 billion) and 8.9 billion euros ($10.6 billion) and 2026 revenue of between 34 billion euros ($40.6 billion) and 39 billion euros ($46.5 billion), representing growth of 4% to 19%.
Is the stock a buy?
As a monopoly on the technology needed to make advanced chips and memory, ASML is in a good position. However, its revenue growth, while solid, has not been as strong as you might think it should be, given the huge demand for data center infrastructure. This is largely due to a slowdown in its China revenue. It's not allowed to sell its EUV technology into the country, and there had been a pull-forward in demand for even its older machines.
While I like the stock over the long term, given the stock's recent surge and moderate revenue growth, I'd stay on the sidelines for now.
