ASM lowered its sales forecast. Why do analysts expect the stock to rise?

Dutch company ASM International, which manufactures equipment for the production of next-generation chips, has lowered its sales forecast for the second half of 2025. The company expects revenue to be 5-10% lower than in the first half of the year. The reason is weaker demand from key customers including Intel and Samsung. On this news, the stock was losing 6.4% at the moment - it became the largest intraday drop since July. And since the beginning of the year, the securities have slipped almost 12%. Analysts believe that despite short-term difficulties, ASM retains the potential to grow faster than the market.

ASM International cut its sales forecast for the second half of the year. The company cited weaker-than-expected demand from some customers, Bloomberg writes.

The semiconductor equipment maker expects revenue in the second half of the year to be 5-10% lower than in the first half at constant exchange rates. The company had previously expected second-half revenue to be in line with the first half. Now, ASM said that third quarter performance will be in line with previous guidance, but a downturn is expected in the fourth quarter.

The company also said revenue will exceed €5.7 billion ($6.7 billion) by 2030, implying average annual growth of at least 12%.

Shares of ASM at the moment were falling by 6.4% - it became the largest intraday decline since July. Later, the securities recovered most of their losses and at the time of publication were down 0.7%. Since the beginning of the year, the company's shares have fallen by 11.7%.

ASM reported a decline in demand for its products, as its key customers are experiencing difficulties in adapting to technological changes in the industry, Bloomberg writes. For example, Intel said in July that it would be more cautious in spending and would abandon some plant construction projects. Samsung Electronics' chip division reported a 94% drop in operating profit in the quarter ended June.

ASML, the largest chip lithography equipment maker, also revised its sales growth forecast for next year, citing uncertainty in the global economy.

Lower demand will also affect order bookings, with ASM warning that it will receive fewer orders in the second half of the year than it actually realizes in sales, hurting growth expectations for 2026, Reuters writes.

Degroof Petercam analyst Michael Reg said the weak sales forecast came as a surprise, as the world's largest contract chip maker TSMC is launching a new manufacturing process using ASM equipment, Reuters writes.

"This could be a consequence of problems at ASM's other key customers, Intel and Samsung," Reg said.

ING analyst Mark Hesselink attributed the company's weak outlook to a temporary shift in order bookings rather than a structural problem. His opinion is quoted by Reuters.

Analysts at JPMorgan, Citigroup and Oddo BHF cited ASM's long-term revenue growth outlook through 2030 as a reason to remain positive on the company's prospects, Bloomberg writes.

ASM is benefiting from the move to so-called gate-all-around (GAA) technology, an advanced chip architecture it works with that improves device performance. ASM now expects that moving to the next generation of GAA technology will increase the potential market size in which it can realistically operate by another $500 million.

"ASM is performing well even in a challenging cycle: growing faster than the industry and expanding margins, while retaining significant growth opportunities through the end of the decade," Citi analysts said in a Sept. 23 note.

Last week, AlphaValue/Baader Europe downgraded ASM from "buy" to a more subdued "add" rating, while raising the target share price from €559 to €568. This valuation implies a 13.6% upside for the stock.

Oddo BHF last week reiterated a buy recommendation on the stock with an "outperform" rating. It maintained a target price of €690, which implies a 38% upside for the stock.

This article was AI-translated and verified by a human editor