Stock Analysis & Ideas

ASML vs. AMAT: Which Semiconductor Stock Is a Better Buy?

Story Highlights

Even though the semiconductor industry is suffering from supply chain bottlenecks, its prospects look very strong on the back of growth initiatives undertaken by companies and the U.S. government to boost the production of chips. 

ASML Holding N.V. (NASDAQ:ASML) and Applied Materials, Inc. (NASDAQ:AMAT) are the two semiconductors companies in the United States that have solid prospects and could appear interesting to prospective investors. This is because semiconductor companies in the U.S. have now started to strengthen their manufacturing capabilities to resolve the ongoing issue of chip shortages.

Not only this, even the U.S. government has shown its seriousness toward this grave problem by introducing the CHIPS Act, which majorly focuses on boosting the manufacturing of semiconductor chips in the country.

A pictorial representation of stakeholders’ views on ASML and AMAT is provided below. This chart is designed using the TipRanks’ Stock Comparison tool.

ASML Holding N.V. (NASDAQ:ASML)

The $202.7-billion company provides software, hardware, and various services to the semiconductor industry, especially to the developers of logic and memory chips. The company is headquartered in the Netherlands.

In July 2022, ASML’s President and CEO, Peter Wennink, said that the demand for their systems was “driven by global megatrends in automotive, high-performance computing, and green energy transition.”

He added that the solid demand was despite “signs of slowing demand in certain consumer-driven market segments.”

For 2022, the company forecasts sales to grow 10% year-over-year. It expects gross margin to be within the 49%-50% range.

Is ASML Stock a Buy or Sell?

Despite near-term issues, the long-term prospects of this semiconductor company appear bright, which makes it an attractive long-term investment option.

On TipRanks, analysts are unanimously optimistic about the prospects of ASML stock, which warrants a Strong Buy consensus rating based on three Buys. ASML’s average price target is $661.33, representing upside potential of 32% from the current level. Shares of ASML have declined 41.9% so far this year.

On the contrary, the investor sentiment is Neutral on the stock. As per TipRanks, the number of portfolios with exposure to ASML stock increased just 0.4% in the past 30 days.

Hedge funds, too, are seen shying away from the stock, and have sold 994,000 ASML shares in the last quarter.

Applied Materials, Inc. (NASDAQ:AMAT)

The $83.03-billion company manufactures and provides equipment, software, and services to the semiconductor and other industries. The product offering of this California-based company includes fabricating equipment for making semiconductor chips, ion implantation technology, and chemical vapor deposition technology.

In August, Applied Materials’ President and CEO, Gary Dickerson, said, “We feel confident in our ability to navigate macroeconomic headwinds and remain very positive about the long-term strength of the semiconductor market and our outsized growth opportunities.”

For the fourth quarter of Fiscal 2022 (ending October 2022), the company forecasts revenues to be within the $6.25-$7.05 billion range, with the mid-point being $6.65 billion. Adjusted earnings are forecast to be $1.82-$2.18 per share.

Is AMAT a Good Stock to Buy?

With solid long-term prospects, Applied Materials stock seems to be a good investment option for prospective investors.

The company has a Strong Buy consensus rating based on 16 Buys and four Holds. AMAT’s average price forecast of $131.80 suggests upside potential of 36.57% from the current level. Shares of AMAT have declined 30.2% since the beginning of 2022.

On TipRanks, investor sentiment is Positive on the stock. The number of portfolios with investments in AMAT stock has grown 3.4% in the past 30 days. Also, hedge funds’ sentiment is Very Positive on the stock, as they have purchased 6.1 million AMAT shares in the last three months.

Concluding Remarks

Despite facing supply-chain hurdles in the near term, both ASML Holding and Applied Materials are optimistic about their growth prospects in the long term. The U.S. Government’s CHIPS Act of 2022 has also strengthened prospects for semiconductor companies. Per this Act, the Government intends to give financial support of as much as $52 billion to chip manufacturers, along with offering tax credits worth $24 billion on investments in semiconductor manufacturing.

As of now, AMAT appears to be a better investment option compared to ASML. This opinion is backed by AMAT’s higher upside potential, positive investor sentiment, and a Very Positive hedge fund signal. Further, AMAT has a Smart Score of nine out of 10, which mirrors its potential to outperform the broader market. ASML, however, scores a five out of 10 on TipRanks.

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