Is this a world-class stock to buy for explosive growth in 2025?

This Fool says ASML is his top stock to buy at the moment. Here are the main reasons he thinks it could deliver price growth of nearly 40% in 2025.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Warren Buffett taught us not to try to time the market when looking for stocks to buy. However, it’s important that I value companies carefully before investing in them.

Part of this requires a close look at any business’s future earnings growth potential. One company I’m keen on at the moment, ASML (NASDAQ:ASML), has positioned itself well for what I think will be explosive returns next year.

Flat 2024, dynamic 2025?

After the chipmaker showed a minor contraction over the past 12 months, its outlook for next year is much more favourable. Management is targeting revenue of between €30bn and €40bn for 2025, indicating potential growth of 45% from previous levels.

Should you invest £1,000 in Asml right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Asml made the list?

See the 6 stocks

A lot of this massive increase in demand is going to be related to AI. The firm’s monopoly in producing smaller, more powerful chips is also supporting this growth. Its proficiency in extreme ultraviolet lithography, a process used to print intricate patterns on semiconductor materials, is fundamental to this.

ASML forecasts that the semiconductor market is going to grow at an annual rate of approximately 9% from 2020 to 2030. Therefore, the company’s potential short-term gains aren’t all I’m bullish about. I think this investment is a worthy long-term holding to consider.

Expensive, but worth it

The market has valued the business highly. However, I believe the risks here are low. The high future growth analysts and management have forecast means a rich valuation is likely to be sustained for now.

At the moment, the shares trade at a forward price-to-earnings ratio of over 24. That’s high if I compare it to the industry median of nearly 19. That being said, a company with exceptional three-year annual earnings per share growth of 33% is always going to be more expensive than companies performing more moderately.

The current average 12-month analyst price target on ASML indicates a 38.5% price increase. That’s an extremely good reason to invest, and it’s a foundational reason why I’ll be buying these shares as soon as I can.

What could go wrong?

No investment is risk-free. One of the major concerns I have with this opportunity is that after a boost to revenue growth in 2025, I think market sentiment could wane. That’s because the company and analysts are expecting much more moderate results in 2026.

That contraction in rates of expansion affects the valuation multiples of a company, including the price-to-earnings ratio and the price-to-sales ratio. Therefore, I do expect some volatility in the share price around the end of 2025.

In terms of broader long-term risks, I also believe there could be an issue geopolitically. Already, the US government has restricted ASML from selling its advanced lithography machines to China.

Any escalations in Taiwan, which is where ASML’s key customer, Taiwan Semiconductor Manufacturing Company, is based, could further complicate matters. This could cause a significant potential impact on ASML’s medium-term revenues.

This is a world-class buy for me

There are very few investments that I consider perfectly positioned for massive future gains. However, I think this is one of them.

Despite any issues ahead, I’m comfortable with the risk-to-reward profile here. I’ll be buying ASML shares as soon as possible.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Asml right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Asml made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Oliver Rodzianko has no position in any of the shares mentioned. The Motley Fool UK has recommended ASML and Taiwan Semiconductor Manufacturing. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

£10,000 invested in the FTSE 100 at the start of 2025 is now worth…

The FTSE 100 has bounced back from April’s tariff sell-off. Roland Head crunches the numbers and highlights a stock to…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

Up 20% with a 9% yield! This stock remains my top passive income earner

When it comes to earning passive income through dividend investing, this major FTSE 100 insurer is the undeniable winner in…

Read more »

4 Teslas in a parking lot at a charger station
Investing Articles

Tesla vs Ferrari: which stock is leading the race in 2025?

This writer digs into the Q1 numbers to see whether his decision to choose Ferrari over Tesla stock has been…

Read more »

Businessman with tablet, waiting at the train station platform
Investing Articles

Here’s the growth forecasts for Next shares through to 2028!

Next's shares have risen in price again after another forecast-raising trading statement. Is the FTSE 100 company a white hot…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Up 145%, this investment trust has a P/E ratio of 10. Is it still a bargain?

The long-term track record of this investment trust has been excellent. Our writer thinks it could still be a bargain…

Read more »

Bournemouth at night with a fireworks display from the pier
Investing Articles

These 3 dividend shares are on fire but they’re still dirt-cheap and pay piles of income!

Harvey Jones is hugely impressed by 3 FTSE 100 dividend shares that have managed to deliver on two key fronts,…

Read more »

DIVIDEND YIELD text written on a notebook with chart
Investing Articles

9% yield! Is this one of the best dividend stocks to consider buying right now?

With signs the worst for it might be over, dividend investors should add B&M European Value to their lists of…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Down 26% in 3 months! What’s going on with the Alphabet share price?

Stock market investors sold off Alphabet (NASDAQ:GOOG) shares heavily yesterday. Is this a worry or a timely buying opportunity to…

Read more »