TD Cowen reiterates Buy on ASML stock, cites EUV strength By Investing.com

ASML reported Q4 2025 EPS of €7.35 vs €7.58 expected (3.03% miss) but revenue beat at €9.72B vs €9.69B consensus. TD Cowen reiterated a Buy and set a EUR1,500 price target, naming ASML its top European idea for 2026, while BofA raised its target to EUR1,598 (from EUR1,583) and lifted 2026–2028 estimates (2026 revenue growth projected at 18.5%). Analysts cite ASML's EUV monopoly as critical to AI-driven semiconductor scaling; the stock trades at a P/E of 47.89 and is up ~100% over the past year, with growth forecasts (~10% YoY) lagging some peers. These factors support a constructive long-term thesis despite a marginal EPS miss and valuation premium.

Analysis

Market excitement is pricing forward a multi-year cadence of tool shipments and installed-base service growth; that creates a two-speed path where calendar-quarter earnings are dominated by shipment phasing rather than steady demand. Expect volatility around order intake and shipment confirmations over the next 3–9 months as customers defer or accelerate deliveries to match wafer starts for AI/DRAM cycles, producing outsized moves on seemingly minor guidance tweaks.

The more important second-order beneficiaries are precision optics, vacuum and photonics suppliers and software/inspection vendors who earn higher incremental margins on mature install-bases — their revenue is less lumpy and will re-rate as consensus shifts from “tool sales” to “recurring high-margin services” over 12–30 months. Conversely, legacy-capex exposed equipment providers will see amplified cyclicality if foundry/DRAM customers concentrate spending into fewer vendors; that concentration increases counterparty and execution risk across the supply chain.

Key catalysts: near-term order announcements and shipment cadence (days–weeks), 3–9 month visibility into customer wafer-start guidance, and 6–24 month regulatory moves (export policy or licensing changes). Tail risks that would reverse the current bullish trajectory include abrupt customer capex cuts in DRAM/foundry, a delay in next-node adoption timelines, or new export constraints — any of which could compress multiple turns of valuation within 6–12 months and steepen downside given current sentiment and positioning.

Key Decisions for Investors

• Long ASML (ASML) via call-spread: Buy Jan-2028 1500C / Sell Jan-2028 2000C, size 1.0–1.5% NAV. Rationale: captures multi-year premium while financing part of exposure; target ~30–40% upside to spread value if order cadence remains intact. Risk management: cap premium loss to spread cost; close if underlying drops >25% from entry or if order intake reveals sustained demand contraction.
• Pair trade to de-risk cycle exposure: Go long ASML (1% NAV) and short Lam Research (LRCX) (1% NAV) for 6–12 months to isolate premium/monopoly rerating vs broader semicap cyclicality. Expect 10–20% relative outperformance if scarcity/pricing power persists; unwind if spread tightens by >15% or if wafer starts data show broad-based capex acceleration across the entire supply chain.
• Tail-hedge export/regulatory risk: Buy 9–12 month ASML puts at ~20–30% OTM (size 0.25–0.5% NAV) as insurance against a sudden China/export licensing shock. Cost is insurance against a >20% move; treat as event risk hedge tied to geopolitical headlines and regulatory sessions.
• Buy selective suppliers with recurring revenue exposure: Initiate long positions in metrology/inspection and vacuum/precision suppliers (e.g., KLA (KLAC), MKS Instruments (MKSI)) sized 0.5–1% NAV, horizon 12–24 months. Rationale: less lumpy cashflows and direct margin upside from service/upgrade attach rates; take profits as multiples expand by 20–30% or if tool shipment guidance materially downgrades.