On Friday, BofA Securities adjusted its outlook on ASM International NV (AS:ASMI) (ASM:NA), reducing the price target to €746 from the previous €849, while still recommending the stock as a Buy. The revision comes in response to a lowered earnings forecast for the years 2025 and 2026, which has been adjusted by 7-8%.
This change is attributed to several factors: a decrease in revenue projections due to reduced capital expenditures by Intel (NASDAQ:INTC) and risks associated with the Chinese market, a decline in gross margins due to a lesser contribution from China, and an increase in operational expenses as the company invests more in research and development to support future growth.
The firm's analyst cited that the revised quarterly order estimate for ASM International now stands at €771 million, which is slightly below the consensus securities estimate of €786 million. Despite the reduced price objective, BofA Securities reaffirms its Buy rating for the company.
The analyst emphasizes ASM International's strong position in atomic layer deposition (ALD) and epitaxy technologies, which are essential for the transition to gate-all-around (GAA) transistors, as well as the company's gains in market share within the high-bandwidth memory (HBM) sector.
The new price target of €746 is based on a 29 times multiple of the company's expected 2025 enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization), an increase from the previously used 26 times multiple for the 2027 estimate.
This valuation is on the higher end of ASM International's historical range, which spans from 12.5 to 31 times. The analyst notes that this reflects the company's long-term growth potential and its strategic position about significant industry developments.
InvestingPro Insights
Adding to BofA Securities' analysis, recent data from InvestingPro provides further context on ASM International's financial position and market valuation. The company's market capitalization stands at $30.72 billion, reflecting its significant presence in the semiconductor industry.
InvestingPro data shows that ASM International is trading at a P/E ratio of 50.71, which aligns with one of the InvestingPro Tips indicating that the company is "trading at a high earnings multiple." This high valuation multiple suggests that investors have strong expectations for future growth, despite the analyst's reduced earnings forecast.
Interestingly, while BofA Securities has lowered its price target, ASM International has demonstrated strong performance with a 43.69% price total return over the past year. This robust return may be attributed to the company's strategic position in ALD and epitaxy technologies, as highlighted in the analyst's report.
An InvestingPro Tip notes that ASM International "has maintained dividend payments for 14 consecutive years," which could be attractive to income-focused investors. However, with a current dividend yield of 0.48%, the company's appeal may lie more in its growth potential than its income generation.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for ASM International, providing a deeper understanding of the company's financial health and market position.
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