ASML Holding Stock Falls 32% in 6 Months: Should You Hold or Fold?

ASML Holding ASML, a global leader in semiconductor manufacturing equipment, has seen its stock price tumble 32.2% in the past six months. This dramatic decline has significantly underperformed the Zacks Computer and Technology sector and the S&P 500, which returned 6.5% and 11.2%, respectively, over the same period.ASML stock has also underperformed its peers, including Lam Research LRCX, Applied Materials AMAT and Advanced Energy Industries AEIS. Advanced Energy Industries shares have risen 8.1%, while Lam Research and Applied Materials have plunged 24.7% and 28%, respectively.6-Month Price Return PerformanceImage Source: Zacks Investment ResearchInvestor concerns about muted guidance for 2024 and 2025 have weighed heavily on the stock. While the dip has raised questions about whether ASML Holding is a bargain or a value trap, the best strategy, for now, might be to hold the stock and wait for clearer skies.ASML’s Short-Term Challenges Weigh on Investors’ SentimentASML Holding’s third-quarter 2024 results were solid, with net sales of €7.5 billion and net income of €2.1 billion, reflecting year-over-year growth of 11.9% and 9.7%, respectively. Earnings per share also rose 9.8% to €5.28, showcasing operational efficiency.However, ASML Holding’s muted guidance for the fourth quarter has tempered investor enthusiasm. ASML projects sales in the range of €8.8-€9.2 billion with a gross margin of 49-50%, signaling profitability challenges. Management’s forecast of weaker order intake in 2025, due to sluggish recoveries in mobile and PC markets, adds to the cautious outlook.Analysts have revised earnings estimates downward, reflecting reduced optimism about near-term growth, further pressuring the stock.Image Source: Zacks Investment ResearchASML’s High NA EUV: A Strategic Bet With Margin PressureASML Holding’s High Numerical Aperture Extreme Ultraviolet (High NA EUV) systems are critical for manufacturing advanced chips powering artificial intelligence (AI) and high-performance computing. While these systems position ASML at the forefront of technological innovation, their complexity and high production costs have created short-term margin pressures.In the third quarter, ASML shipped two High NA EUV systems, with revenues expected by year-end. However, management anticipates a 3.5% margin dilution in the fourth quarter due to the ramp-up costs associated with these systems. Scaling production will likely continue to weigh on profitability in the near term.Geopolitical Risks and Macro Challenges for ASMLGeopolitical tensions, particularly between the United States and China, present a substantial risk. With China accounting for 47% of ASML Holding’s lithography shipments in the third quarter of 2024, escalating U.S. export restrictions could impact revenues from this critical market.In addition, broader macroeconomic concerns, such as inflation, slowing demand in mobile and PC markets and delayed recovery in the memory segment, further cloud the near-term outlook. These challenges underscore the cyclical nature of the semiconductor industry, even as it prepares for a long-term rebound.Premium Valuation: A Concern for ASML StockDespite its recent slide, ASML Holding remains expensive compared to its peers. Its forward 12-month price-to-earnings multiple of 28.17X exceeds the Zacks Semiconductor Equipment - Wafer Fabrication industry average of 27.86X. By contrast, competitors Lam Research, Applied Materials and Advanced Energy Industries trade at more modest multiples of 20.95X, 17.89X and 25.40X, respectively.The premium valuation reflects ASML Holding’s industry leadership and technological edge but limits immediate upside potential.Image Source: Zacks Investment ResearchWhy ASML Remains a Long-Term WinnerASML Holding’s long-term growth story is compelling. As the global leader in EUV lithography, the company plays an indispensable role in producing advanced chips used in AI, 5G and high-performance computing. Its €36 billion order backlog highlights sustained demand for its cutting-edge equipment.ASML Holding’s alignment with megatrends, such as AI adoption, renewable energy and digital transformation, positions it for continued growth. Ongoing global investments in semiconductor fabrication plants further bolster its outlook, as these facilities will require ASML’s lithography systems to scale production.Efforts to enhance capacity and strengthen supply-chain partnerships demonstrate ASML Holding’s adaptability and commitment to meet rising demand in a rapidly evolving market.Conclusion: Hold ASML Stock for NowWhile ASML Holding faces short-term headwinds, including margin pressures, muted guidance and geopolitical risks, its dominant position in the semiconductor manufacturing ecosystem and alignment with transformative industry trends make the stock worth holding.The company’s premium valuation reflects its technological leadership, but near-term challenges could cap upside potential. For investors, holding ASML Holding stock allows participation in its robust long-term growth story while navigating temporary volatility. Patience appears to be the best strategy for now, as the company remains well-positioned to capitalize on the future semiconductor boom. ASML stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ASML Holding N.V. (ASML): Free Stock Analysis Report Lam Research Corporation (LRCX): Free Stock Analysis Report Applied Materials, Inc. (AMAT): Free Stock Analysis Report Advanced Energy Industries, Inc. (AEIS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks