Wolfe Research sees ASML stock pullback as buying opportunity

Wolfe Research analyst Chris Caso notes ASML posted solid Q2 bookings and maintained full year 2024 guidance, which the firm thinks sets up for a strong second half of 2024 and 2025. The stock is, however, down on the report, which Wolfe attributes to two reasons. One concern relates to Q3 revenue guide coming in slightly below consensus, but the firm thinks that’s simply a function of timing. The other relates to reports of additional pressure from the U.S. government regarding China restrictions. According to news reports, Washington is seeking to restrict service on restricted tools, for which U.S. companies are already restricted but ASML is not. Wolfe notes Washington is seeking leverage via the foreign direct product rule. But its initial interpretation is that the goal is to restrict service, not to further restrict older immersion tools. If the firm’s interpretation is correct, this too would represent noise, since China services are a small part of revenue. Wolfe’s first reaction is to buy ASML on the pullback. The firm has an Outperform rating on the shares with a price target of EUR 1,050.