By Andrew Bary

This article is an excerpt from " Alphabet and 9 More Stocks to Buy for 2025," published on Dec. 13, 2024. To see the full list, click here.

Few companies are more critical to the semiconductor industry than ASML.

The Netherlands-based company makes specialized lithography machines that allow the production of high-performance chips used in smartphones, PCs, and data centers -- and which can cost $200 million or more.

ASML has virtually no competition in its high-end EUV machines, which use extreme ultraviolet light, and that has made it Europe's No. 2 tech company -- behind only Germany's SAP. At about $715, the stock trades for 28 times 2025 earnings of $25 a share and looks appealing after falling 20% in October following a cut to its 2025 revenue guidance.

The company sees lithography spending rising at a 10% to 20% annual rate through 2030, hitting about $55 billion at the midpoint of a recent forecast, up from $32 billion this year, as global semiconductors top $1 trillion that year.

J.P. Morgan analyst Sandeep Deshpande has a price target of about $1,150 a share, noting the stock has rarely traded so cheaply based on its long-term forecasts. Another fan is Vontobel analyst Davit Khachatryan. "Ultimately, ASML's monopolistic position and alignment with powerful secular trends position it as a cornerstone investment in the semiconductor supply chain -- a secular growth story with attractive valuation," he says.

Write to Andrew Bary at andrew.bary@barrons.com

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December 26, 2024 00:01 ET (05:01 GMT)

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