Against a long-term backdrop, it’s difficult not to be bullish on lithography specialist ASML Holding (NASDAQ:ASML). As CNBC mentioned a few years back, ASML represents the only company in the world making the $200 million machines needed to develop advanced microchips. Therefore, the businesses oozes relevance. Still, as the fallout in the innovation sector proved recently, even stalwarts like ASML stock are not immune to volatility.
Over the past 30 days, ASML finds itself in a rare position, staring at a loss of almost 10%. With the red ink, an auspicious start to 2025 is starting to look much less so, with a year-to-date return of only 1.5%. Still, for forward-looking contrarians, the selloff seemingly offers a compelling opportunity. After all, in the past one year, ASML stock is down over 27%.
That would seem to be a sweet discount. Per CNBC, ASML commands a monopoly on the fabrication of extreme ultraviolet (EUV) lithography machines. These specialized instruments allow semiconductor firms to print intricate designs on silicon wafers, imbuing microchips with a range of functions. To say that ASML is vital to the tech ecosystem would be a gross understatement.
Sure enough, Wall Street analysts aren’t shy about broadcasting their optimism for the enterprise. In the current fiscal year, experts anticipate that ASML’s revenue will reach $32.55 billion, up 15.16% from the prior year. For fiscal 2026, the consensus calls for sales of $36.47 billion, up just over 12% from projected 2025 revenue.
Even better, ASML stock now trades for 9.04X trailing-12-month (TTM) sales. About one year ago, the metric stood at nearly 13X. So, it’s a clear discount, right?
Well, looks might be deceiving. Here’s why.
While the fundamental narrative for ASML stock may appear to be crafting a no-brainer opportunity, it’s the technical signs that’s giving me pause. Specifically, over the long-term chart, the equity may be charting a bearish head-and-shoulders pattern.
Granted, the field of technical analysis can often resemble the Street’s version of a Rorschach test. However, the potentially bearish pattern — signified by two shoulders, one in July 2023 and the other in late January of this year, and a peak or head in July 2024 — is materializing at a sensitive time for the broader economy.
Prior to President Donald Trump’s tariffs and subsequent trade war with key economic partners, circumstances for the economy seemed quite positive. Unfortunately, with affected nations responding with levies of their own, it’s possible that we could enter a recession. In that case, growth-oriented names like ASML stock are suspect.
It must be noted that statistically, the odds generally favor the bulls. Over an eight-week period, the chances that a long position will rise in value is just under 63%. Ordinarily, I would be in favor of buying ASML stock, especially since there’s evidence that investors buy modest dips in the security.
However, when volatility gets sizable, ASML becomes far less predictable. For example, on Monday, the stock dropped almost 7%. If such a loss had been modeled for a one-week period, the likelihood of an eight-week long position being profitable slips to 55.56%.
That’s still bullish but it also indicates that apprehension could be working its way into ASML stock. Therefore, it may be prudent to wait for another drop before considering a long position.
