Shares of lithography systems manufacturer ASML Holding (ASML 8.44%) soared on Wednesday even though the company gave cautious guidance for 2024. Investors, however, looked past the cautious outlook because financial results for the fourth quarter of 2023 were just so darn good. As of 9:45 a.m. ET, ASML stock was up about 8%.
Orders are starting to pick back up
Lithography systems are crucial to semiconductor manufacturing, and ASML has a stranglehold on the market. To be clear, business was relatively slow in 2023. But it bounced back in a big way in Q4, which is why the market is so upbeat.
In Q4, ASML had net sales of 7.2 billion euros, which was up almost 13% year over year. The company also provides other forward-looking metrics that were very promising. It had net bookings of nearly 9.2 billion euros. For perspective, that was almost as much as it had in the previous three quarters combined.
Bookings signal future revenue for ASML. And right now, the company has a backlog of 39 billion euros. That’s down from its backlog of 40.4 billion euros in the prior-year period. But it’s still massive.
Management remains cautious
The semiconductor industry is notoriously cyclical, and ASML CEO Peter Winnink said, “The semiconductor industry continues to work through the bottom of the cycle.” Because it’s still near that bottom, the company believes that revenue in 2024 will be about the same as in 2023, and it also believes that its gross margin will modestly decline.
It may seem strange for ASML stock to be up so much, as it anticipates a relatively slow year in 2024. However, management was quick to point out its belief that the semiconductor space will surge in 2025, and it’s gearing up for that. ASML business has boomed during past upswings in the cycle, and it’s reasonable to expect that again.
Therefore, there’s still reason for long-term optimism with ASML stock.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.
