ASML is Revising Expectations Higher as Sales Accelerate. Time to Buy?

Parkev highlights ASML's critical role in the AI ecosystem as ASML provides essential manufacturing equipment to giants like TSMC, Intel, and Micron. The company recently outperformed revenue expectations, and Parkev notes that ASML raised 2026 revenue guidance to $11.5 billion with a 56% gross margin. Parkev observes that ASML's revenue has increased fivefold since 2017, reaching $41.2 billion, driven by aggressive capacity expansions from customers who are rushing to meet the demand for GPUs and CPUs.

Parkev emphasizes ASML's operational excellence, pointing to an operating profit margin that has risen to 35.4% and a return on invested capital of 46%. Because ASML has a small, concentrated customer base, Parkev notes that Parkev can communicate effectively with clients to manage demand and maintain pricing power. Parkev believes the company is at least one or two steps ahead of any competition, especially in high-end product segments where ASML essentially holds a monopoly.

Regarding valuation, Parkev mentions that while a forward P/E of 29 might seem like an undervaluation for a business of this caliber, Parkev's discounted cash flow (DCF) model tells a different story. Even after revising Parkev's estimates higher due to booming AI demand, Parkev calculated a fair value of $1,400 per share. Given that the current market price is around $1,739, Parkev concludes that the stock is slightly overvalued and maintains a "hold" rating with medium conviction.