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ASML tops EPS and revenue estimates, to surpass all time highs on earnings drift

by Thea Coates Finance Reporter
26th Jan 24 9:21 am

ASML, a company that produces lithography systems used in the production of semiconductors, beat analyst revenue and EPS estimates on January 24.

  • EPS of $5.64 per share versus the $5.16 average analyst estimate.
  • Revenue of $7.8 billion versus $7.4 billion average analyst estimate.

The company provided revenue guidance of $5.7 billion for the current quarter. Analysts were predicting $6.8 billion.

The stock jumped 8.85% following the earnings announcement on the morning of January 24. The stock was up as much as 11% in intraday trading.

The company expects 2024 to be similar to 2023, with analysts predicting only slight EPS growth. The CEO stated that “significant growth” is expected in 2025. Industry analysts concur that the average EPS growth estimate over the next five years is 23.6% per year.

That is very similar to the average EPS growth the company has seen over the five years at 26% per year.

The stock has been a stellar performing, on average, over the years. The annualized return over the last decade is 26.6%. The S&P 500 has averaged 12.3% per year.

ASML has a dividend yield of 0.7%. That may not seem like much, but the dividend amount has increased an average of 22% per year over the last decade. The company has a buyback yield of 0.4% (share repurchases) bringing the shareholder yield up to 1.1%.

ASML technical outlook

The fundamental outlook is favorable, based on the above information. EPS is expected to keep growing following a flatter year in 2024.

The stock price has been on a rollercoaster over the last few years. It had its largest decline in 2021/2022 since the 2008 market crash.

Since 2009, pullbacks have ranged between 32% and 40% before rallying to new highs again. The 2021/2022 decline was 59%.

The price has rallied as much as 141% off that low and is nearing the 2021 all-time high of $877.32. The stock currently trades at $847.31.

The stock has been moving aggressively higher since late 2023, rallying about 50% during that time.

Cory Mitchell, an analyst with Trading.biz watches for small pullbacks following a favorable earnings gap. “Following a strong gap higher on earrings, I watch for the price to drop or even move sideways for several days. This creates the pullback. When the price starts moving up again I initiate a long with a stop loss below the pullback low that just formed.”

This method capitalizes on high-momentum situations and a phenomenon known as “earnings drift.” This is when the price increases in the weeks and months following a favorable earnings announcement. Consider a trailing stop loss based on a 10- or 20-day moving average.

Whether a setup will form on ASML at this time is unknown, and there are always risks in trading, but currently, the trend is up and the stock has reacted favorable over the long-term when surpassing prior highs.

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