ASML gets big vote of confidence; shares up 3%

Morgan Stanley has upgraded ASML Holding NV to "overweight" and raised its price target to €950 from €600, implying 20% upside, based on expectations for a memory demand recovery, a broader logic customer base, and margin benefits driving 2027 earnings to €33 per share, 8% above consensus. The bank anticipates order momentum to build by late 2025, signaling an inflection point beyond current earnings downgrades, with ASML shares reacting positively, rising 3% to €818.10, despite acknowledging potential risks from logic or Chinese demand.

Analysis

ASML Holding NV has received a significant endorsement from Morgan Stanley, which upgraded the stock to “overweight” and raised its price target by over 58% to €950 from €600, implying approximately 20% upside from its current trading price of €818.10. The bank's thesis posits that the cycle of earnings downgrades has concluded, shifting focus to a substantial recovery projected for 2027. This outlook is underpinned by an earnings forecast of nearly €33 per share for 2027, a figure 8% above consensus estimates. Key drivers for this anticipated growth include a recovery in the memory market, diversification of its logic customer base beyond Taiwan Semiconductor, and enhanced margins from an improved product mix and cost discipline. Morgan Stanley anticipates an inflection in order momentum before the end of 2025, with Q4 order intake expected to surpass Q3, providing a leading indicator for revenue in late 2026 and 2027. While risks such as weakening logic demand or a drop-off in Chinese orders for less advanced tools are noted, the analysis concludes that the risk-reward profile is skewed positively, supported by a bull case scenario of €1,400 per share.

Key Decisions for Investors

• Investors should consider the forward-looking nature of this bullish thesis, which positions ASML for a cyclical upswing in 2027 rather than immediate-term performance, aligning with the 20% upside to the new €950 price target.
• It is prudent to monitor key leading indicators cited in the report, specifically memory (DRAM) pricing trends and ASML's order intake momentum towards the end of 2025, to validate the recovery narrative.
• While the outlook is positive, investors must track the identified risks, including any signs of increased customer concentration in logic or a material decline in demand from China for less advanced lithography tools, which could challenge the growth forecast.