Updates for ASML, Visa, and ServiceNow

Here we go again, time for another action packed earnings season! Let's take a look at the first 3 stocks in our follow list to report: ASML, Visa, and ServiceNow.

ASML (ASML) Q4 2023

ASML's fourth quarter (and fiscal year) report came in slightly above expectations, with a bit over €7.2 billion euros in sales and a gross margin of 51.4%. System sales totaled 449 in the quarter, a good increase over 345 a year ago. However, it is clear that the semiconductor cycle is still on the downswing, as net bookings came in 10 billion lower for 2023 vs. 2022, although fourth quarter bookings (at €9.2 billion) were the strongest of the year.

Management expects 2024 sales to be roughly the same as 2023, with some signs that the semi industry cycle has passed its nadir. 2025 is expected to be a return to robust growth. From my viewpoint, strong cycles are a fact of life investing in semiconductors, and ASML retains its impressive competitive advantages and market dominance in EUV. The biggest thing moving my fair value estimate is the strengthening of the euro vs. the U.S. dollar. I'm upping the fair value target to $798 from $750. ASML stock currently trades a bit above that, so we will leave it on watch.

Visa (V) Q1 2024

Visa's entrenchment in the global financial system is a given, and as such it is a pretty predictable company. Q4 sales growth of 9% was right on expectations. Payments volume was +8%, processed transactions was +9%, and cross-border fees grew 16%, continuing the patterns we've seen pretty much since the end of the COVID pandemic. Visa announced a couple of small acquisitions in Prosa (payments processing in Mexico) and Pismo (cloud-based banking platform). Share repurchases and dividends totaled $4.4 billion in the quarter.

Pretty much business as usual here with no surprises. The fair value price gets a small bump to $323 (from $321), adjusting for the time value of money.

ServiceNow (NOW) Q4 2023

Another predictable stalwart, ServiceNow exceeded its Q4 guidance with 26% growth in total revenues, and 24% growth in backlog. We continue to see strong growth in large customers as well, with 33% growth in >$1 million deals in the quarter. The firm now has close to 1,900 customers paying it over $1 million in annual contract value. I love large deal SaaS firms, it really reinforces the switching costs inherent in these platforms.

ServiceNow's future continues to look bright. This is a platform where AI can really be put to good use, and the firm is going all-in on adding it to its offerings. Continued business momentum, strong switching costs, and substantial forward growth continue to make it one of my favorite companies in the portfolio. The target price gets a good bump from $572 up to $619. At present, ServiceNow is trading a good bit over that, so I recommend holding for now.