ASML stock falls after Morgan Stanley downgrades estimates

Shares of (ASML) are falling as Morgan Stanley became the latest bank to downgrade earnings estimates for the chip company. Deutsche Bank and UBS both previously downgraded estimates, citing growth concerns for the broader chip market and increased competition from both Intel (INTC) and Chinese manufacturers.

Catalysts Hosts Seana Smith and Madison Mills report more on the bearish calls and analyze ASML's stock performance over the last month.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video transcript

We're going to move over to a SML.

Shares are down right now, after Morgan Stanley becoming the latest bank to downgrade earnings estimates for the chip maker.

We said JP.

Morgan earlier, but it's Morgan Stanley, Deutsche Bank and U. BS previously downgraded estimates due to growth concerns for the chip market and greater competition from Intel and Chinese manufacturer.

City, on the other hand, has named a SML their top tech pick in Europe after this summer's dip.

And I do want to mention valuation is always a key part of the conversation when it comes to these.

Chip valuations peaked at 30 to 35 times, uh, price to earnings back in July.

So we are seeing a little bit of a decline in that.

And I also want to mention that there's certainly still some bullishness across Wall Street.

When it comes to this name.

You got 30 buys nine holes in just one cell.

But again, Morgan Stanley noting not only the challenges for the chip maker just in terms of potential earnings growth headwinds, but also the uncertainty of demand more broadly from memory chip makers, which could be a bearish signal for the likes of Intel as well.

Yeah, talking about the slowing drum cycle that they are expecting the fact that that could then further reduce a chip maker spending.

They're viewing that as a big risk here for a SML or a huge headwind, I should say, at least in the short term, the Morgan Stanley team led by Lee Simpson.

The reason why this is significant was one it used to be a topic designation for that team.

But then, even beyond that, Morgan Stanley had been overweight a SML since November of 2022.

So again, this downgrade really, uh, signifying the fact that they are a shift Or do you view this as a shift in terms of what that valuation is what exactly the road ahead looks like for a SML, uh, over the coming quarters.

Given the slowdown that we are seeing.

And like you were saying, Maddie, it is not just an a SML issue.

We're seeing this more broadly, and that's also reflected in some of these larger, larger cap chip names.

And then you don't have to look any further than what some of the weakness that we've seen here in the US most recently, and we can see it reflected in the Philadelphia Semiconductor Index that has been under a tremendous amount of pressure over the last couple of months.