Until very recently, it seemed that ASML (ASML 0.23%) stock would continue to defy gravity. Investors kept piling into the stock of the semiconductor equipment specialist as they thought it would ride the hot technology of our day -- artificial intelligence (AI) -- to ever-greater heights.
But then came the company's first-quarter earnings report in mid-April. Currently in the midst of a strategic transition, ASML reported a double-digit plunge in both revenue and per-share earnings. That once high-flying stock began to dive, and it hasn't yet regained altitude. Yet analysts tracking its fortunes continue to believe in it; one bull can foresee it gaining nearly 15% in price when it starts flying again.
ASML bull stays steady on the stock
That analyst is Jim Kelleher of Argus, who weighed in on ASML several days after the company posted those at-first-glance disappointing quarterly figures. Undaunted, Kelleher reiterated his buy recommendation on the highly specialized chip stock and $1,000 price target, which implies the double-digit upside mentioned above.
While the analyst wrote in a new research note that he was staying "cautious" on the stock for this year, he waxed enthusiastic about its future. In his opinion, the company has unrivaled leadership in state-of-the-art extreme ultraviolet (EUV) lithography for printing patterns on semiconductor chips. This should spur notable growth in 2025, given that demand for artificial intelligence-ready chips is likely to remain strong.
On the downside, Kelleher feels that the EUV segment will be basically flat in terms of revenue this year.
A revolutionary investment
So, at the moment, ASML looks more like a stock for patient bargain-hunters than for people looking to book a quick profit on a hot trend. As with many stocks in the chip industry, its revenue and profitability can seesaw quite a bit, so some tolerance for volatility is required here.
Ultimately, though, I agree with Kelleher's view -- this is a company on the cutting edge of manufacturing chips necessary for the AI revolution, and as such, it's more than a compelling buy at current price levels.
