With strong demand for leading-edge logic chips and improving demand for memory chips, pretty much everything is going ASML's (ASML) way these days.
When I last wrote on the company, I said, "give me a 10% pullback" and I'd be tempted to buy in. The shares pulled back about 7% and then shot up nearly 60%, handily beating the NASDAQ and SOX indices, though trailing other semi cap equipment names like Applied Materials (AMAT), Advanced Energy Industries (AEIS), Lam Research (NASDAQ:LRCX), and Tokyo Electron (OTCPK:TOELY) to varying degrees. Pull the comparisons out to a year and ASML looks more competitive, but still not a sector leader - a reminder, perhaps, that valuation can still matter at the margin.
As things stand today, I continue to love this business, but the valuation is even harder to handle. Yes, top companies deserve premium valuations, and ASML's moat and growth prospects absolutely merit designation as a top company. Still, I believe interest rates are more likely to head higher than lower from here, and I just can't find an argument for valuation beyond a sort of musical chairs relative value approach.
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ASML Riding High On Exceptional Demand For Its Leading-Edge Semiconductor Tools
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