We recently compiled a list of 10 High Growth NASDAQ Stocks That Are Profitable in 2024. In this article, we will look at where ASML Holding N.V. (NASDAQ:ASML) ranks among the high-growth NASDAQ stocks that are profitable.

Will the Bull Market Continue as We Enter the Earnings Season?

Malcolm Ethridge, Capital Area Planning Group managing partner, joined CNBC to talk about where the market could go and his sentiment regarding the AI and overall tech sector. While many analysts believe that it will be the small caps that will lead the growth with interest rates easing and the economy slowing down. We recently covered the 8 Most Undervalued Penny Stocks To Buy According To Analysts, where we talked about how Tom Lee, co-founder of Fundstrat Global Advisors likes the small cap in the current market environment. Here’s a piece from the article:

“To talk about what the stock market looks like today and in the near future. Tom Lee, co-founder of Fundstrat Global Advisors joined CNBC in a recent interview. He has been one of the strong proponents and supporters of small-cap stocks. Lee says that we are in a volatile environment currently, due to a few reasons, one being the elections in less than 30 days, the second being the Middle Eastern crisis which is scaring investors, and lastly the port strike that has the potential to cripple the economy. However, he still expressed his optimism that the year-end has a lot of tailwinds and investors shouldn’t be afraid to buy the dip. Moreover, Lee also highlighted that these current events are all short-term headwinds in a buying cycle and are expected to die down quickly.

Lee thinks that bottoms are tough and processed, and small caps are in the process of what could be a multi-year bottom. Therefore the conviction is that some people might want to buy the big names on NASDAQ and the AI market, however, with small caps trading at lower multiples of P/E less than 10, the risk and reward lie in small caps. Lee further mentioned that interest rate cuts and better earnings growth make the path for small-cap growth more visible.

Tom Lee has also reaffirmed his belief that the S&P 500 could close above 5,700 by year-end, supported by strong economic fundamentals and a dovish Federal Reserve beginning to cut interest rates. He noted that significant cash reserves are available for investment, which could drive stock prices higher in the next three to twelve months.”

Ethridge thinks otherwise, he believes that mega-cap stocks will continue to lead market growth, although not at the same pace as in recent years but still at a steady pace. He attributes this to the ongoing influence of artificial intelligence (AI) on various sectors, including real estate and manufacturing, which are becoming increasingly vital due to rising demands on infrastructure.

Moreover, while explaining why the mega caps will lead the growth, Ethridge pointed out that for the big tech stocks, Fed rate cuts were not necessary as they had significant cash on their balance sheets to reinvest into newer AI ventures. We have already seen Magnificent Seven invest heavily in AI despite the high rate of borrowing thereby leading the bull market in difficult times.

The rate cuts have now made it easy for other companies that didn’t have enough cash to borrow and invest in technology. However, he also pointed out that the pace of rate cuts might slow down moving forward, thereby making it hard for small caps to keep up the technology investment race. Ethridge suggests that investors may need to adjust their expectations regarding future Federal Reserve rate cuts.

Moreover, we are also entering earnings season, will the earnings derail the momentum or continue to boost the market? Drew Pettit, Citi Research Director of US Equity Strategy joined CNBC in another interview. He thinks that we are in for a decent quarter, although we are in an expensive market.

While talking about how various sectors will perform, Pettit mentioned that software has the highest bar within tech, meaning its growth expectations are high, yet many software companies are not monetizing effectively. This creates volatility in stock performance. As earnings reports come in, Pettit suggests investors should focus on consumer behavior and credit conditions, particularly in the banking sector, which is expected to perform well this quarter. He also encouraged investors to look beyond the recent quarter earnings into 2025 and 2026, while choosing companies to invest in.

Our Methodology

To curate the list of 10 high-growth NASDAQ stocks that are profitable in 2024 we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance as our sources. Using the stock screener, we got an initial list of major NASDAQ stocks sorted by their market capitalization. Next, we sourced the 5-year net income growth and revenue growth rates for these stocks from Seeking Alpha and the GAAP trailing twelve-month net income from Yahoo Finance. We only selected stocks that had 5-year net income and revenue growth of more than 15%. Lastly, we ranked the stocks by the number of hedge fund holders in Q2 2024 from Insider Monkey’s database. The list is ranked in ascending order of the number of hedge fund holders.

Why do we care about what hedge funds do? 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).

ASML Holding N.V. (NASDAQ:ASML)

5-Year Net Income Growth: 24.01%

5-Year Revenue Growth: 18.88%

TTM Net Income: $6.74 Billion

Number of Hedge Fund Holders: 81

ASML Holding N.V. (NASDAQ:ASML) is a leading company in the semiconductor industry, primarily known for producing advanced equipment used to manufacture microchips. It designs and manufactures machines called lithography systems, which are crucial for creating the tiny patterns on silicon wafers that form microchips. These machines are essential for any chipmaker thereby giving the company an indispensable position in the AI market.

It operates internationally with operations in The Netherlands, the United States, South Korea, Taiwan, and Japan. ASML Holding N.V. (NASDAQ:ASML) is about to have a stock split, however, a stock split isn’t necessarily a catalyst for growth but a sign of management’s confidence that the shares will continue to grow.

What’s more important are the strong fundamentals of the company which ASML Holding N.V. (NASDAQ:ASML) demonstrates through its market-leading position. It is the only supplier of extreme ultraviolet lithography (EUV) machinery, which is essential for printing advanced chips. It also generates significant revenue from servicing already installed devices. The company has grown its servicing revenue faster than new system installations.

These machines installed by the company have a lifespan of 25 to 30 years thereby ensuring long-term and steady growth for the years to come. The current year for ASML Holding N.V. (NASDAQ:ASML) is a transition year where the company does not expect any revenue growth as it is gearing up for a record next year. Management is expecting revenue to be between 30 billion and 40 billion euros ($33.17 billion to $44.2 billion) in 2025. Stated that the company has grown its top line by around 19% and bottom line by around 24% during the past 5 years, the projections do not sound far-fetched.

Baird Chautauqua International and Global Growth Fund stated the following regarding ASML Holding N.V. (NASDAQ:ASML) in its Q3 2024 investor letter:

“ASML Holding N.V. (NASDAQ:ASML): After a 35% price appreciation in 1H24 and a beat in 2Q24 numbers, investors are apprehensive about Intel capex cuts, potential memory weakness, and a less clear cyclical recovery pace in 3Q24 and potentially 2025. We remain positive on long-term demand for ASML’s products due to industry supply/demand factors for computing power.”

Overall ASML ranks 7th on our list of the high-growth NASDAQ stocks that are profitable. While we acknowledge the potential of ASML as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock 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 was originally published on Insider Monkey.