We recently compiled a list of the 8 Stocks That Could 10X Over the Next 3 Years. In this article, we are going to take a look at where ASML Holding N.V. (NASDAQ:ASML) stands against the other stocks that could 10x over the next 3 years.
The New Presidency and The Future of Big Tech
The new president of the United States is set to take office in January 2025, and investors are concerned about how the new policies will impact big tech. On November 14, Arvind Krishna, Chairman and CEO of IBM, appeared in an interview on Yahoo Finance to share his expectations from big tech as the new presidency takes over the White House. Krishna shares that he expects more innovation and less regulation in the tech sector, with certain “guardrails.” He adds that the business community is particularly excited and expects strong tailwinds to the US economy as we enter 2025.
In the same interview, William Kerwin, an analyst at Morningstar Technology, appeared to discuss the potential future of big tech under the new presidency and how the new policies could impact companies, particularly those trading in China. Kerwin emphasizes that a lot is yet to unfold but the most crucial element is tariffs. With a proposed 60% tariff on Chinese imports, companies reliant on the region will face severe headwinds and may have to seek trade relationships with other regions like India and Southeast Asia. However, he does add that high exposure to China does not necessarily equate to “high investment risk.”
READ ALSO 10 Best Predictive Analytics Stocks to Invest in Now and 12 Cheap Chinese Stocks to Buy According to Hedge Funds.
Speaking of mergers and acquisitions and antitrust regulations, Kerwin is rather optimistic. He expects more merger and acquisition deals to come through over the next four years. In addition to that, he expresses that anti-trust regulations are less likely to be focused on a specific company or a product, and more on the platforms and their respective use cases offered by big tech. Kerwin also adds that he does not expect significant breakups but foresees regulations to be enforced that “erode” the competitive advantages the big tech companies enjoy at the moment.
Kerwin believes that companies well exposed to artificial intelligence are currently overvalued. However, he reiterates that this “does not mean” that there are not any opportunities within the sector. He also shares a couple of names in the chip equipment and semiconductor sectors that are well-positioned at the moment. He suggests that while these sectors are pressed over cyclicality worries and the fear of AI reaching maturity, some companies hold promise and are valuable.
Since investors are excited to see the business opportunities coming over the next four years, there are certain stocks, especially in the realm of technology, most likely to gain significant momentum. That said, let’s take a look at the 8 stocks that could 10x over the next 3 years.
Our Methodology
To come up with the 8 stocks that could 10x over the next 3 years, we sifted through multiple similar rankings and compiled an initial list of 20 stocks. We then ranked the top 8 based on their upside potential, as of November 18, 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician in a clean room working on a semiconductor device, illuminated by the machines.
ASML Holding N.V. (NASDAQ:ASML)
Analyst Upside as of November 18, 2024: 32%
ASML Holding (NASDAQ:ASML) is a semiconductor equipment company headquartered in the Netherlands. Foundries use ASML’s extreme ultraviolet (EUV) lithography machines to manufacture AI chips.
On November 14, the company held its 2024 investor day, where the company unveiled its long-term strategies and focus. ASML (NASDAQ:ASML) expects annual revenue in 2030 to range between EUR 44 billion and EUR 60 billion supported by a gross margin between 56% and 60%. The company’s outlook remains promising, as AI creates a bolstering opportunity for it. Due to rising demand for EUV, the company expects EUV lithography spending to grow in the double-digit range between the forecasted years of 2025 and 2030.
In the third quarter of 2024, ASML (NASDAQ:ASML) generated EUR 7.5 billion in sales and EUR 2.1 billion in net income. Revenue growth came from the demand for DUV and installed base management sales. In Q3, ASML reported net bookings worth EUR 2.6 billion, of which EUR 1.4 billion comprised EUV. For the fiscal fourth quarter of 2024, the company expects net sales to reach between EUR 8.8 billion and EUR 9.2 billion, with full-year revenue reaching EUR 28 billion.
The company has an 83% market share in lithography, explaining why analysts are bullish on the stock and their median price target of $869.22 represents an upside of 32% from current levels. According to the company’s CEO, the company expects EUV demand to grow gradually into the next decade, positioning it as a stock expected to 10x over the next 3 years.
Overall ASML ranks 4th on our list of the stocks that could 10x over the next 3 years. While we acknowledge the potential of ASML as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ASML but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.