Semiconductor equipment leader ASML on Wednesday beat Wall Street's targets for the second quarter but missed views with its sales guidance. ASML stock fell on the report and the possible impact of more curbs on exports to China.
Netherlands-based ASML earned the equivalent of $4.36 a share on sales of $6.79 billion in the June quarter. ASML reports financial results in euros. Analysts polled by FactSet had expected ASML earnings of $4.03 a share on sales of $6.53 billion. On a year-over-year basis, ASML earnings fell 21% while sales declined 12%.
For the current quarter, ASML predicted sales of $7.66 billion, based on the midpoint of its guidance. Analysts had been looking for $8.24 billion in the third quarter. In the same period last year, ASML's sales totaled $7.03 billion.
The Dutch company makes advanced lithography equipment for etching tiny circuits onto semiconductors. It is the world's only manufacturer of extreme ultraviolet (EUV) lithography equipment.
On the stock market today, ASML stock sank 12.7% to close at 932.05.
More Export Restrictions Ahead?
ASML stock retreated on news of a proposed increase in export restrictions to China on high-end semiconductor manufacturing equipment.
Bloomberg reported Wednesday that the U.S. is considering whether to impose a measure called the foreign direct product rule. The FDPR lets the U.S. impose controls on foreign-made products that use even the smallest amount of American technology.
CFRA Research analyst Brooks Idlet cut his price target on ASML stock to 1,113 from 1,169 but kept his buy rating after the Q2 report. He lowered his price target on news of potential further export restrictions to China.
"We see today's news-related sell-off as an overreaction given the trailing-edge nature of existing China sales, but we lower our multiple to account for potential sales losses," Idlet said in a client note.
ASML Stock Is A Recent Breakout
In the second quarter, China accounted for 49% of ASML's revenue, unchanged from the first quarter.
"Our outlook for the full year 2024 remains unchanged," ASML Chief Executive Christophe Fouquet said in a news release. "We see 2024 as a transition year with continued investments in both capacity ramp and technology. We currently see strong developments in AI, driving most of the industry recovery and growth, ahead of other market segments."
Bookings were above consensus estimates, which should reassure investors, Bernstein analyst Sara Russo said in a client note.
"Anticipation for an upgrade to guidance did not materialize," Russo said. She maintained her outperform rating on ASML stock with a price target of 1,052.
On June 12, ASML stock broke out of a 13-week consolidation pattern at a buy point of 1,056.34, according to IBD MarketSurge charts. It hit an all-time high of 1,110.09 on July 11 before pulling back. With Wednesday's plunge, ASML stock crashed below its 50-day moving average line, a key support level.
ASML stock is on the IBD Tech Leaders list.
Aehr Test Systems Beats Targets
Elsewhere among semiconductor equipment stocks, Aehr Test Systems stock rocketed after the company reported better-than-expected fiscal fourth-quarter results late Tuesday.
The maker of semiconductor test and burn-in equipment also announced a deal to acquire Incal Technology for $21 million. The acquisition will give Aehr ultra-high-power test solutions for AI accelerators, graphics and network processors, and high-performance computing processors.
Aehr stock jumped 22.4% to close at 20.61 on Wednesday.
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