To The Moon

$ASML Holding NV(ASML)$

Market Surge Across the Board

What a phenomenal day in the markets. Every single company finished in the green—many with significant gains—following the announcement that tariffs will be paused. The “Magnificent 7” stocks all ended the day up by double digits.

Gains Before the Announcement

Interestingly, the market was already up about 1% before any formal announcement was made. Then came the big news: the President announced a 90-day pause on tariffs. That sent markets soaring, adding $4 trillion in value—a rally that now ranks as one of the strongest days for markets since 2001.

Semiconductors Lead the Rally Semiconductors led the charge. Even AMD, which had lagged despite positive announcements in recent sessions, surged 24%. Nvidia followed closely, jumping 19%, while Tesla stood out with a 23% gain.

Shift in Market Sentiment

Sentiment at the open was deeply negative, with fear readings around 3 on the scale. That’s since improved slightly to 16. But let’s be clear: we remain in bearish territory, and any major news can dramatically sway markets—as we just witnessed.

Uncertainty Ahead

However, it's difficult to predict what comes next. Pre-market indicators show a possible reversal, with major stocks down 3–4%, including the Magnificent 7. This might signal that the bottom still isn't in. It's a reminder to stick with your strategy—whether that’s dollar-cost averaging or another disciplined approach.

China Retaliates

Markets are moving fast. Just after our last update went live, news broke that China had imposed 84% retaliatory tariffs on U.S. goods. The escalation is real, and tensions between the U.S. and China are clearly intensifying.

When Barbarian Tweet The Buy

Interestingly, before the rally, Trump tweeted that it was a "great time to buy stocks"—right before the 90-day pause announcement and market surge. Historically, when presidents have made bullish statements, they’ve often coincided with market bottoms. For example, in March 2009, just days before the market bottomed following the '08 crisis, President Obama made a similarly optimistic comment about long-term stock value.

Trump's Tariff Tweet Breakdown

In Trump’s tweet, he also declared a 125% tariff increase on China due to their perceived disrespect of global markets. Yet, in the same message, he authorized a 90-day pause on tariffs for over 75 trade partners, introducing a reciprocal 10% rate while negotiations continue.

Trade Tensions and Temporary Relief This message confirmed two things:

1. Rising tensions with China.

2. A temporary easing of tariffs for many U.S. allies.

Apple’s Best Day Since 1998 And the market responded—Apple, which has heavy manufacturing exposure in China, had its best day since 1998, climbing 15%. Overall, this was the second-best market day since 2001. As we’ve discussed before, 7 of the 10 best market days occur during bear markets. Volatility like this isn’t unusual—remember that in 2020, the second-best day came right after the second-worst.

Will the Rally Hold?

Answer is No

We saw strong moves across the Dow, S&P 500, and Nasdaq. But again, pre-market weakness suggests that not all gains may hold. This rally wasn’t limited to the U.S.—European stocks also rose nearly 5%, offering some relief after days of steep losses.

Goldman Sachs Reverses Recession Call Goldman Sachs had recently increased their recession probability to 45%, the second upward revision in days. However, immediately after the tariff pause announcement, they walked that back, stating they no longer see a recession as likely. Global sentiment is shifting fast.

Allies Respond Positively U.S. Treasury Secretary Bessent expressed confidence that Trump can reach trade deals with allies. The EU responded positively to the pause, offering a “zero-for-zero” tariff arrangement. Vietnam is also initiating discussions, and it’s likely more agreements are being quietly negotiated behind closed doors.

Bill Ackman’s Tantrum and Turnaround As a humorous aside, hedge fund manager Bill Ackman—whose vocal frustrations have coincided with market bottoms in the past—recently thanked Trump on Twitter. His fund, heavily invested in Nike (11% of the portfolio), saw a swift 11% rebound. His fund, worth nearly $13 billion, is just one of many that benefited from this reversal. We’ll be watching for moves from other key figures like Warren Buffett or even Nancy Pelosi—always worth noting.

Earnings Season Incoming Looking ahead, earnings season is just days away. Companies will begin to report, offering commentary on how tariffs might impact their business. Expect guidance revisions, and possibly further volatility depending on how much of the bad news is already priced in.

Spotlight: ASML Ahead of Earnings

Let’s quickly look at one company ahead of earnings: ASML. It reports next Wednesday. The stock jumped 15% yesterday but is down over 5% pre-market. It's still 31% off its 12-month high and essentially flat year-to-date. However, over the last 10 years, it’s up 627%, vastly outperforming the S&P.

Valuation Signals Still Strong Despite the rally, it trades at a forward P/E of 26, far below its 5-year average of 33.9—suggesting a strong undervaluation. Its dividend yield is also slightly above its 5-year average. Valuation models confirm this, showing the price still well below the expected fair value range.

Intrinsic Value Estimate Our intrinsic valuation suggests a fair value just over $1,000, making ASML a compelling opportunity if you believe in the long-term growth of semiconductors.

ASML Valuation Breakdown & Margin of Safety Analysis

This is something we've discussed many times before, and it's based on our DCF (Discounted Cash Flow) model. The foundation of the model uses ASML’s free cash flow, which has averaged a 41% growth rate over the past decade. For our base case, we’ve used a more conservative 14% growth rate. Keep in mind, we always show low, medium, and high scenarios—these figures are, of course, subjective.

You can download a copy of this model using the pinned comment below and plug in your own assumptions, whether for ASML or any other company. Based on our 14% growth assumption and a standard discount rate, we calculate the present value of all future free cash flows and terminal value. After adding cash and subtracting total debt, we arrive at the equity value. Divide that by the number of outstanding shares, and you get an intrinsic value of $1,055, which implies 62% upside—even after yesterday’s big rally.

For full transparency:

• At the low-end assumption (12% growth), we get a fair value of $920, showing 41% upside.

• At the high-end (16% growth), the model gives us a valuation of $1,129, or 85% upside.

We typically use the 14% midpoint here on the channel, but we also apply a margin of safety—usually 10%—and only act when our three golden criteria are met:

1. A wide moat

2. Strong financials

3. Positive forward-looking indicators

If you think today's price around $950 is attractive, you're still looking at around 35%–40% upside—even after recent gains. Wall Street currently has a consensus price target of $933, suggesting around 43% upside over the next 12 months.

For those leaning more conservative:

• Using a 12% growth rate, you're still looking at a 25–30% margin of safety, which remains fairly compelling.

• If you’re ultra-conservative and go with a 10% growth rate, you’re still getting a 15–20% margin of safety—not bad at all for a high-quality business.

So the question we’d pose to you: Is ASML a buy, hold, or sell at these levels? Let me know your thoughts—whether it’s already in your portfolio, on your watchlist, or if you think it lacks the moat or fundamentals to warrant a spot.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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