Eindhoven, Netherlands- After recommending a buy rating for ASM International (OTCQX:ASMIY) in mid-March ’23, analysts are now reviewing the company’s latest developments following the 1Q24 results announcement. The results showed sequential growth in revenue and margins, reinforcing the bullish outlook on ASMIY’s business and stock performance.
With revenue reaching EUR639 million in 1Q24, representing a 1% sequential increase from the previous quarter, analysts are optimistic about the company’s steady growth trajectory. The significant uptick in gross margin from 47.2% to 52.9% and EBIT margin from 20.8% to 29.3% sequentially further solidified the positive sentiment towards ASMIY’s performance.
Notably, ASMIY’s order intake in 1Q24 stood at EUR698 million, a 3% increase sequentially and 10% year-over-year, driven by strong pilot line orders related to the 2nm GAA transition. The company has been seeing heightened interest from customers for the 2nm GAA transition, particularly in AI applications, indicating a promising outlook for future order growth.
Furthermore, key manufacturers like TSMC, Samsung, and Intel have expressed intentions to start preparing for high-volume production using GAA in 2025, hinting at a potential surge in orders for ASMIY in the coming quarters and into FY25. The plans for new state-of-the-art fabrication facilities by ASMIY’s important clients also point towards a substantial investment in fabrication equipment, setting the stage for continued order growth.
In light of the growing demand for AI and memory chips, particularly in the logic chip segment, ASMIY is expected to benefit from the shift to smaller node sizes, enhancing chip performance and efficiency. The strong demand for 2nm chips driven by AI applications aligns with ASMIY’s product offerings, positioning the company well for future growth in the semiconductor industry.
Looking ahead, ASMIY management’s guidance of EUR3 to EUR3.6 billion in revenue for FY24, alongside expectations for increased China sales and demand for mature nodes, underscores a positive outlook for the company’s earnings and margins. Analysts believe that ASMIY’s strategic positioning in key market segments will continue to drive growth and profitability in the foreseeable future.
In conclusion, analysts reiterate a buy rating for ASMIY based on the overall optimistic outlook for the company’s performance and the strong 1Q24 results. Despite the high valuation reflecting growth expectations, the market is anticipated to maintain a premium multiple as long as ASMIY meets its guidance. However, the risk of a potential temporary growth blip remains a concern, which could lead to multiple contraction if not managed effectively.
