ASML (NASDAQ: ASML) is a linchpin of the global semiconductor market. The Dutch company is the world's largest manufacturer of lithography systems, which are used to etch circuit patterns onto silicon wafers. It's also the only supplier of high-end extreme ultraviolet (EUV) lithography systems, which are used to produce the world's smallest and densest chips.
The world's most advanced chip foundries -- Taiwan Semiconductor Manufacturing (NYSE: TSM), Intel (NASDAQ: INTC), and Samsung -- all rely on ASML's lithography systems. As a result, it generates stable revenue growth, its gross margins are expanding, and its stock still looks reasonably valued at 35 times forward earnings.
I believe ASML is still a solid long-term investment, but four red flags have also appeared since the beginning of the year. Let's discuss these challenges and how they could throttle ASML's near-term gains.
Source Fool.com