ASML shares fell 5% on Tuesday, following a 5.9% drop the previous day, amid reports that China is developing its own immersion deep ultraviolet lithography machines, a sector where ASML currently leads.
However, Bank of America analysts, led by Didier Scemama, reassured investors by reiterating a buy rating and a price target of $2,845, indicating a potential upside of over 70% from the recent closing price. Scemama emphasized that the threat from China is modest, noting that ASML derives about 20% of its total sales and 44% of its DUV revenue from the Chinese market.
He argued that creating a domestic alternative to ASML's technology would be challenging due to the high standards required for productivity and cost-effectiveness. Even if China were to successfully produce 20 argon fluoride immersion tools, it would only affect a small portion of ASML's sales, approximately 1.4 billion euros, or 2.4% of total sales by 2027.
The analyst described the current stock weakness as an overreaction and suggested that it presents an attractive buying opportunity. Overall, ASML remains a favored stock among analysts, with 22 ratings of buy or strong buy and an average price target suggesting a 30% increase from current levels