UBS upgrades ASMI to Buy, sees clearing event ahead for stock

UBS has upgraded ASM International to a Buy rating, citing an attractive entry point and a projected 20% EPS CAGR between 2025 and 2029 driven by underappreciated revenue opportunities in advanced logic and DRAM exceeding €5 billion by 2030. While acknowledging near-term headwinds including normalization in China and process uncertainty at Samsung/Intel, UBS believes these risks are largely priced in at a forward P/E below its five-year average, anticipating a potential clearing event for the stock following a reset in 2026 expectations.

Analysis

UBS has upgraded ASM International (ASMI) to a Buy rating, identifying an attractive entry point based on its long-term growth potential despite near-term uncertainties. The bank projects ASMI can achieve approximately 20% earnings per share (EPS) compound annual growth rate (CAGR) between 2025 and 2029, extending beyond the widely understood transition to gate-all-around (GAA) transistor architecture. UBS highlights several underappreciated revenue drivers, particularly in advanced logic and DRAM, including new materials like molybdenum and ruthenium, and new chip architectures such as backside power delivery and selective ALD, with the latter potentially scaling to over €1.5 billion in annual revenues at the A10 node, contributing to a total addressable market exceeding €5 billion by 2030. While acknowledging short-term headwinds – such as normalization in China, process and demand uncertainty at Samsung and Intel, and potential macro weakness, leading UBS to forecast 2026 earnings 12% below consensus – the bank believes these risks are substantially priced into ASMI's current valuation. The stock trades at a forward price-to-earnings (P/E) ratio of 29x for 2026 and 22x for 2027, below its five-year average of 30x for comparable growth phases. UBS anticipates that downward revisions to 2026 expectations in the upcoming quarters, potentially around the Q2 earnings release or the September Capital Markets Day, could serve as a clearing event for the stock. Despite trimming its price target from €610 to €570 per share due to lowered EPS estimates for 2025–2027 reflecting macro and currency risks, UBS maintains a positive outlook on strong structural upside, viewing ASMI as one of the most attractive compounder stories in the European semiconductor sector.

Key Decisions for Investors

• Investors could consider the current valuation of ASM International as an attractive entry point for long-term exposure, in line with UBS's Buy rating, particularly if they can look past anticipated near-term earnings pressure.
• Closely monitor ASMI's Q2 earnings announcement and its September Capital Markets Day, as these events are highlighted by UBS as potential catalysts that could lead to a re-evaluation of the stock once 2026 expectations are reset.
• Anticipate potential downward revisions to consensus earnings estimates for 2026 in the coming quarters; any resultant share price weakness might represent a strategic buying opportunity for those aligned with the long-term compounding growth thesis.