Looking through to 2027, UBS upgrades ‘quality compounder' ASML to buy

UBS upgraded ASML to 'buy' with a raised target price of €750 from €660, anticipating a strong growth period from 2027 through 2030 despite a challenging 2026. The upgrade is predicated on improving lithography intensity, driven by TSMC's A14 logic process ramp-up in 2027, and robust adoption of High NA technology, which could account for 30% of group revenue growth in 2027/2028. UBS projects a 20% compound annual EPS growth from 2026-2030, underscoring ASML's deep customer integration and long product lead times, which support looking past its recent stock underperformance.

Analysis

UBS has upgraded ASML to 'buy' and increased its price target by approximately 14% to €750, signaling a long-term conviction that outweighs the stock's recent 15% underperformance against the Euro Stoxx 50 index in 2025. The core of the thesis requires investors to look past a pre-announced difficult 2026 towards a strong growth period from 2027 to 2030. This optimism is founded on two primary drivers: a projected recovery in lithography intensity starting in 2027, catalyzed by TSMC's A14 logic process ramp-up, and the significant adoption of next-generation High NA technology. UBS forecasts that High NA could contribute 30% of group revenue growth in 2027/2028 and has consequently raised its post-2027 earnings per share growth estimates by 4% to 7%. The firm now projects a 20% compound annual growth rate in EPS from 2026 to 2030, supported by ASML's long product lead times and deep customer integration. From a valuation standpoint, the stock's multiple of 27 times 2027 forecast earnings is slightly below its 10-year average of 28, suggesting a reasonable entry point for a forward-looking position.

Key Decisions for Investors

• Investors with a multi-year investment horizon should consider the recent share price weakness as a potential buying opportunity, aligning with the long-term growth catalysts projected to materialize from 2027.
• It is crucial to be prepared for potential share price volatility and underperformance through 2026, as the company has already telegraphed this as a challenging transition year.
• Monitor company guidance closely for updates on the High NA technology adoption timeline and manufacturing schedules from key customers like TSMC, as these are the primary signposts validating the long-term bullish thesis.