Investors in ASML, the chip equipment maker, are advised by Bernstein to look beyond any short-term turbulence and instead focus on the company's profit generating potential in the coming year.

According to analyst Sara Russo, who recently upgraded ASML to Outperform from Market Perform, the outlook for 2024 appears well-understood and largely de-risked for the company. Russo also raised her target for ASML to $869 from $664.

ASML plays a critical role in the manufacturing of advanced semiconductors with its extreme ultraviolet (EUV) lithography machines. Key customers of ASML include Taiwan Semiconductor Manufacturing, Samsung Electronics, and Intel.

In afternoon trading on Monday, ASML's stock saw a modest increase of 1.4% to $768.70.

Russo estimates that ASML's earnings will experience a surge of 45% in 2025, following a relatively stagnant year. She believes that the company's technological leadership in lithography tools is unparalleled and faces minimal risk from challengers in China.

"We expect ASML's dominance in lithography to continue," Russo wrote.

Over the past 12 months, ASML's stock has risen by 19%, compared to the impressive 56% increase for the iShares Semiconductor ETF.

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