Claiming that one company holds the key to all advanced technology is a big statement, but it's true when you consider what ASML (ASML -1.70%) does. It manufactures extreme ultraviolet (EUV) lithography machines, and it's the only company on the planet with the technology to do so. As a result, it holds a technological monopoly in this space.
It's important to note that monopolies aren't necessarily illegal, only if they squash competition with anti-competitive practices. ASML hasn't been accused of these practices yet and is so important to technological breakthroughs that it's unlikely it will ever be considered for a breakup.
These kinds of companies are quite rare in the stock market, and I want to own them whenever I can, which is one of the reasons why I'm bullish on ASML's stock.
ASML's machines are highly specialized
ASML's EUV machines lay the tiny electrical traces on the world's smallest chips. With the distance between traces as little as 3 nanometers today (a human hair is usually between 80,000 and 100,000 nanometers thick), it's clear you need specialized equipment to do this work. Furthermore, these chips continue to push the limits of what's possible, as 2-nanometer and 1.6-nanometer chips are slated to be released in 2025 and 2026.
As you can imagine, the equipment required to do this work is incredibly complex and expensive. ASML only sells a handful of machines every quarter, which can make its results quite lumpy.
Image source: ASML.
This makes it critical for investors to focus on the long term with ASML, although many investors have failed to do that.
ASML got crushed last year when it decreased its revenue guidance for 2025 due to export restrictions harming China sales. However, ASML did not touch its 2030 revenue guidance, so the long-term outlook for the business hasn't changed.
Despite this, ASML's stock is down around 35% from its all-time high established last July.
NASDAQ: ASML
Key Data Points
Since then, several of ASML's key clients (such as Intel and Taiwan Semiconductor Manufacturing) have announced large expansions, which will boost ASML's sales.
With the market getting distracted by short-term events and losing sight of long-term guidance, now is an excellent time to scoop up shares, as ASML is expected to grow solidly over the next six years.
ASML's stock is primed to do well over the next few years
A bet on ASML is a bet that more chips and more advanced chips will be used in the future, which seems like a very safe bet to me. By 2030, ASML expects to generate between 44 billion and 60 billion euros in revenue. In 2024, ASML generated 28.3 billion euros in revenue, so this guidance indicates a compound annual growth rate for revenue between 7.6% and 13.3%. If revenue comes in on the lower end of that range, it could be a disappointing investment, but that seems unlikely considering the path that the chip industry is heading down.
Furthermore, ASML has about a 1% dividend yield, so investors will also benefit from that.
ASML also trades near its cheapest levels in three years from a forward price-to-earnings (P/E) perspective.
ASML PE Ratio (Forward) data by YCharts
With the combination of this cheap stock price, a decent dividend, and growth that's projected to be in the double-digits (if it comes in the middle to high end of guidance), ASML seems like a no-brainer buy.
Additionally, there is nearly zero risk of its disruption, as its technology represents decades of research and billions of dollars invested to reach its current state.
Without ASML, the chips that power incredible AI models, smartphones, and self-driving cars wouldn't be possible. As a result, it's one of the world's most important companies, making it a great stock to buy now and stash away.
