ASMIY - ASML ASM International cut by Bernstein on worries over 'softening demand'

2023-07-28 08:40:27 ET

Semiconductor companies ASML Holding ( NASDAQ: ASML ) and ASM International ( OTCQX:ASMIY ) shares were downgraded by Bernstein on Friday as the investment firm said there are concerns over "softening demand" for 2023 and 2024.

"We continue to like the fundamentals and growth for both of these companies as we look towards 2025 and beyond," analyst Sara Russo wrote in an investor note. "However, we believe the risk from softening demand for leading edge logic/foundry and ongoing memory weakness now outweighs the upside."

Russo lowered her ratings on ASML ( ASML ) and ASM ( OTCQX:ASMIY ) shares to market perform from outperform.

For ASML ( ASML ), Russo said the company is seeing "strong" mature nodes out of China, which resulted them in updating guidance for its deep ultraviolet, or DUV, lithography systems, but it cut its guidance for extreme ultraviolet lithography technology.

"As they continue to ramp capacity for EUV demand in the longer-term with a target of 90 machines by 2025, 2024 could be the first year in which EUV capacity exceeds demand," Russo wrote. "While we continue to believe in the long-term growth and defensible market position for ASML in lithography, at this point we believe the cyclical risk for the near-term out-weighs the upside."

Concerning ASM International ( OTCQX:ASMIY ), Russo said its second-quarter results were "solid" and the company is on track to shift to gate-all-around device technology, but there are "cyclical headwinds" for the company.

"While we like the growth later in 2024 and into 2025, we believe the near-term upside has been priced in," Russo explained.

ASML ( ASML ) shares rose 1.4% in pre-market trading on Friday. The company raised its 2023 guidance earlier this month and there is increased optimism the chip equipment maker could benefit from the industry moving to a more advanced chip design.

Analysts are largely bullish on ASML Holding ( ASML ). It has a BUY rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates ASML a HOLD .

More on ASML

• ASML: Buyers Didn't Flee From Geopolitical Headwinds And Likely Won't (Rating Upgrade)
• ASML Holding: EUV Monopoly Rising With Wafer Demand
• ASML: Still A Powerhouse

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