Analyst Note| Abhinav Davuluri, CFA |
ASML reported solid second-quarter results, with revenue at the low end of management’s guidance and slightly below our expectations. We note the firm had EUR 300 million in sales shifted from the second quarter to the third quarter due to two EUV tools being shipped but without a factory acceptance test needed to recognize revenue. Beyond this accounting quirk, ASML continues to benefit from robust equipment sales, with 2021 sales now expected to be up 35% (up from 30% last quarter). Thanks to bold spending plans by major customers such as TSMC and Intel, ASML’s logic and foundry revenue is expected to be up 35% in 2021 (up from 30%). CEO Peter Wennink anticipates memory sales will be up 60% in 2021 (up from 50%), including EUR 1 billion in EUV sales to DRAM customers. Despite EUV not meaningfully being implemented in DRAM manufacturing presently, customers such as Samsung, SK Hynix, and more recently Micron are all committed to deploying the advanced lithography technology in their future DRAM processes. We are raising our fair value estimate for wide-moat ASML to $635 per share from $600 (and EUR 527 per share from EUR 498), as industry adoption of EUV is set to accelerate both this year and beyond.