ASML ADR

ASML Holding had a mixed first quarter with below par revenues but performing better than expected on the revenues front. Net sales increased significantly due to higher-than-anticipated EUV and deep UV revenue from quicker system installation and earlier acceptance in the quarter. The company also shipped 9 EUV systems with significant revenue from 17 systems. Installed Base Management sales increased. More EUV and deep UV immersion revenue more than offset the impact of lower-than-expected upgrade business, resulting in a gross margin for the quarter of 50.6%. While demand is still largely strong in automotive and industrial, memory customers are more aggressively lowering CapEx and limiting wafer output to bring inventory down to more manageable levels. Logic clients also limit wafer output for some market segments, while demand in other sectors remains high, particularly in applications needing more mature nodes. Despite this, logic and memory customers continue to follow their technology roadmaps and invest strategically. In addition, ASML and the Eindhoven University of Technology started a new stage in their enduring collaboration. On the TU/e campus, a new ASML research facility will be built, complete with a cutting-edge cleanroom and a jointly established research program. We give ASML Holding NV a ‘Hold’ rating with a revised target price.