Quarterly Updates for ASML, Microsoft, and Visa

The Q3 earnings reports are starting to roll in, so get ready for a deluge of stock updates over the next several weeks!

The first bunch from our tracked stock lists to report include ASML, Microsoft, and Visa. How are these 3 stalwart companies performing? Let's take a brief look at each.

ASML (ASML)

Semiconductor equipment maker ASML continues to produce good financial results, offset by weak bookings. Sales were up 16% in the quarter, but gross margins were flat at 51.9%. Most notably, bookings continue to be weak. They were just 2.5 billion euros this quarter, well down from 4.5 billion in Q2 and 8.9 billion in the year-ago quarter. EUV bookings (ASML's exclusive next-gen technology) were just 500 million euros.

Management explained that the semi industry is working through the bottom of the cycle, and customers expect to see inflection by the end of this year. We have to just be patient with cyclical stocks like this, but also opportunistic. ASML is trading pretty close to our margin of safety right now, and I'll be ready to pounce should we get just a bit better buy-in point. Cycle lows are the absolute best place to buy these kinds of companies. I expect the firm to bounce back very strongly over the next few years.

I feel like I underestimated 2023 results for ASML, and even after modeling a down 2024, the stock looks attractive. I'm raising the fair value price to $750.

Microsoft (MSFT)

Tech giant Microsoft can be an "auto-pilot" investment for most people, but with it on our Watch List, we want to keep a close eye on a buying point. Q1 results were good. Revenue was up 13%. The story was similar to the previous quarter, with very good performance across all enterprise offerings, particularly Cloud which was up 24%, offset by weaker performance across its consumer portfolio.

There was a bit of good news on the consumer side. First, Windows OEM revenue turned positive at +5%, foreshadowing a rebound in persistently weak PC sales. Second, the Activision-Blizzard deal closed in mid-October, which will juice up Microsoft's gaming results significantly starting next quarter.

The cash flow story remains strong here, and Microsoft continues to pay a modest dividend and buy back a modest amount of shares annually. I'm bumping the fair value price up to $417 from $409. Trading at about 21% under that figure, it is close but not quite attractive enough to add as a "buy". Hopefully soon!

Visa (V)

Another steady, predictable company, Visa delivered Q4 and fiscal year results pretty much in line with our modeling. Revenues were up 11% for both the quarter and the year. Good expense management allowed the firm to deliver a +22% gain in both earnings per share and free cash flow. Growth was solid across all of Visa's business metrics. Payments volume was up 9%, cross-border fees were +16%, and total processed transactions grew 10%.

Visa is a modest grower at this point, but continues to be shareholder friendly with its voluminous cash flows. The firm reduced share count by 2.4% on the year. It also authorized a new $25 billion share repurchase, and raised the dividend by 16% to $0.52/quarter.

All in all, a strong report. Factoring in a slight bump in the FCF margin expectation and accounting for time value of money, the fair value gets a nice bump up to $321 from $298. That's enough to put Visa back in the Buy List as a solid choice for new money right now!