ASML upgraded as UBS eyes return of 'quality compounder'

UBS has upgraded ASML to 'buy' with a €750 price target, anticipating the semiconductor equipment maker's return as a "quality compounder" from 2027. This positive outlook is driven by expectations of increased exposure to ASML's EUV lithography and future High NA technology, notably with TSMC's A14 production ramp to 1.4nm. Despite near-term softness in 2026 already priced into the stock, which is down 30% from 2024 highs, UBS considers the current 24x 2027 earnings valuation attractive, expecting investors to focus on the strong recovery beyond.

Analysis

UBS has upgraded ASML Holding NV to 'buy' and raised its price target to €750 from €660, viewing the current market sentiment as an opportune entry point. The bank's thesis is predicated on a long-term outlook, anticipating that investors will look past the well-publicized softness expected in 2026 to a strong recovery beginning in 2027. This inflection is underpinned by fundamental technology shifts, most notably TSMC's A14 production ramp to 1.4nm process technology, which will intensify demand for ASML's extreme ultraviolet (EUV) systems. Furthermore, the commercial introduction of next-generation High NA lithography technology from 2028-29 is a critical long-term driver, with UBS projecting backlog orders to materialize as early as 2026. The stock's 30% decline from its 2024 all-time high is seen as having already priced in near-term concerns, rendering its current valuation of 24x projected 2027 earnings attractive relative to historical averages. Near-term catalysts that could validate this forward-looking thesis include ASML's 2026 guidance, expected in its Q3 results, and new technology adoption announcements from key customers like Intel and Samsung.

Key Decisions for Investors

• Investors could view the stock's 30% decline from 2024 highs as a strategic opportunity to build a position, given the valuation of 24x 2027 estimated earnings is considered attractive for a long-term 'quality compounder'.
• The investment case requires a long-term perspective, focusing on the strong recovery fundamentals post-2026, driven by the 1.4nm technology cycle and the subsequent adoption of High NA lithography.
• It is crucial to monitor near-term catalysts for thesis validation, specifically the company's official 2026 guidance in the upcoming Q3 results and any definitive announcements from key customers like TSMC, Intel, and Samsung regarding their technology roadmaps.