After posting 180% first-quarter earnings growth, ASML joins Axcelis Technologies, Applied Materials, KLA and Aehr Test Systems in etching new bases and buy zones. With its relative strength line near a 52-week high, ASML stock remains in buy range and earns a spot on IBD Leaderboard alongside fabless chip stock Nvidia.
The stock screen below highlights ASML stock and its top-rated peers in the semiconductor equipment group. The industry ranks a strong No. 30 among the 197 groups IBD tracks.
ASML did not join KLA and Lam Research on this month's list of new buys by the best mutual funds. Overall institutional ownership of ASML is low, with just 10% of its stock being held by funds, according to MarketSmith data. Yet 32 funds with an A or A+ rating from IBD own ASML stock. Plus, the maker of advanced lithography machines crucial to the chip industry sports four quarters of rising fund ownership.
ASLM Leads Growth Among Chip Equipment Peers
Tying Axcelis, ASML scores the highest-possible 99 Composite Rating. In IBD Stock Checkup, AEHR, KLAC, LRCX and AMAT stock also earn grades putting them in the top 5% of all stocks across all sectors.
In the first quarter, ASML led its peers in terms of earnings growth. The company's bottom line soared from a 1% slowdown in Q4 to a 180% EPS spike to $5.37 a share. Wall Street expects ASML to maintain that lead in Q2, with estimates of a 37% earnings increase. In terms of full-year estimates, only Aehr Test Systems' 37% growth estimate tops the Street's 32% forecast for ASML.
ASML also posted a third straight quarter or accelerating revenue. Sales rose from $5.7 billion in Q3 (a 7% slowdown) to $6.99 billion in Q4, to $7.3 billion in Q1 (an 87% increase).
| Company | Symbol | Comp Rating | EPS % Chg Last Qtr | EPS Est Cur Qtr % | EPS Est Cur Yr % | EPS Rating | RS Rating | SMR Rating | A/D Rating |
|---|---|---|---|---|---|---|---|---|---|
| ASML | ASML | 99 | 181 | 37 | 32 | 95 | 90 | A | B- |
| Axcelis Technologies | ACLS | 99 | 17 | 15 | 20 | 96 | 98 | A | B+ |
| Aehr Test Systems | AEHR | 98 | 45 | -7 | 37 | 78 | 99 | A | B- |
| Applied Materials | AMAT | 98 | 8 | -10 | -4 | 88 | 90 | A | B- |
| KLA | KLAC | 96 | 7 | -16 | 18 | 95 | 89 | A | A- |
| Lam Research | LRCX | 95 | -6 | -42 | 0 | 88 | 93 | A | A- |
ASML Teams Up With Nvidia, TSMC
Headquartered in the Netherlands, ASML has a global footprint with over 39,000 employees operating in Europe, Asia and the U.S. The company uses its dominant extreme ultraviolet (EUV) and deep ultraviolet (DUV) technology to build the machines the world's leading semiconductor companies, such as Intel, use to make their chips.
In March, Nvidia announced that it is working with ASML, Taiwan Semiconductor and Synopsys to use artificial intelligence (AI) to accelerate semiconductor breakthroughs. Nvidia introduced its cuLitho software library for computational lithography to design chips with smaller integrated circuits.
ASML Stock Gaps Up Into Buy Zone
While forming the lows of a first-stage cup with handle, ASML reported Q1 numbers April 19. The stock continued to build that chart pattern, then gapped up to break out on Thursday. Volume spiked 56% above average. Holding those gains, ASML stock remains in buy range, which extends up to 717.44. It came off Monday's lows to end the day fractionally higher and at the top of its buy range.
AMAT stock remains in buy range, while LRCX stock is extended. ACLS rose nearly 2% Monday, lifting it to the upper limits of the buy zone.
Nvidia stock has also climbed out of buy range. The driver of AI, gaming graphics and self-driving car technology reports earnings on Wednesday. Meanwhile, AEHR and KLAC continue to set up new buy points.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
