Tech & Science ASML - How much potential does the European tech company still have?

14:40  24 october  2021
14:40  24 october  2021 Source:   fool.de

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In der Chipherstellung werden integrierte Schaltkreise auf Wafer aufgetragen © Provided by The Motley Fool In chip production, integrated circuits are applied to wafers

ASML (WKN: A1J4U4) is currently on a market capitalization of $ 331 billion (as of 22.10.2021). On the other hand, the DAX heavyweight SAP (WKN: 716460) looks really old with its market capitalization of approximately 167 billion US dollars. But in contrast to the market leader for enterprise software, many people have never heard of ASML. This is not surprising as the company does not focus on end customers with its products.

itself the largest customer TSMC (WKN: 909800) is rather unknight despite the current chip crisis. For the other two major customers Samsung (WKN: 881823) and Intel (WKN: 855681) it is likely to ring. These three companies will be the only years the only ones that are able to produce state-of-the-art chips. This is made possible by the technology of ASML.

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EUV lithography: The greatest possible castle trench

ASML is the only company worldwide that offers extreme ultraviolet lithography (EUV). Only with this method smaller chip structures due to shorter optical wavelengths are possible. The predecessor of EUV lithography, the Deep Ultraviolet (DUV) method, is encountered its physical limits. The long development time and the costs make it impossible competitors to compete with ASML in this market for the foreseeable future.

In the current machine generation, ASML works primarily at the availability of the machines and increasing daily wafer production. That makes sense, because the production in the EUV process requires significantly fewer process steps and simplifies production considerably. This reduces energy consumption and reduces costs. This in turn increases the application of the systems. For 2023, the next generation of the machine is already in the starting blocks, which in turn will enable smaller production sizes.

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The need for semiconductors will continue to grow in the next few years. The dissemination of artificial intelligence in all areas, 5G mobile communications, 3D printing, the Internet of things, crypto currencies or virtual worlds favor this trend. The semiconductor market is expected to grow in 2020 to 1 trillion US dollar in 2030 in 2020 in 2020.

The ASML rating is quite athletic

depending on the scenario, ASML expects sales of 24 to 30 billion euros in 2025. For 2021, ASML expects sales of at least 18.5 billion euros. For this purpose, the company is also properly profitable. The margin for EBIT (earnings before interest and taxes) was constantly around 25% in recent years and is likely to improve in the coming years.

However, one pays for this quality company also a corresponding price on the stock market. The expected Free-cash flow return for 2021 is currently 1.6%. Even with the upper end of the forecast for 2025 and slightly improved margins, I come to a value for the free cash flow return of around 3%.

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In my view, the ASML share is therefore currently only suitable as an admixture. For stronger price declines, however, the stock is high on my purchase list.

The article ASML - How much potential does the European tech company still have? first appeared on The Motley Fool Germany .

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Florian does not have the shares mentioned.

The Motley Fool has and recommends shares of Taiwan Semiconductor Manufacturing and recommends ASML Holding, Intel and SAP SE, as well as the following options: Long Jan Jan 2023 $ 57.50 Call on Intel and Short January 2023 $ 57.50 Put on Intel. Motley Fool Germany 2021

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