Morgan Stanley upgrades ASML stock rating to Overweight on earnings potential

Investing.com - Morgan Stanley upgraded ASML Inc. (NASDAQ:ASML) from Equalweight to Overweight on Monday, setting a price target of €950, which implies approximately 20% upside potential. The semiconductor equipment giant, currently trading at $932.15 and near its 52-week high, has shown remarkable momentum with a 30.77% return over the past six months. According to InvestingPro, the stock currently shows 16 key investment signals, including strong financial health indicators and consistent dividend payments.

The upgrade reflects Morgan Stanley’s view that ASML has potential for positive earnings revisions and cyclical recovery, with focus shifting to the 2026-2027 outlook. The firm projects that ASML’s fiscal year 2027 earnings per share could approach €33, approximately 8% ahead of current consensus estimates.

Morgan Stanley attributes the potential earnings growth to expected strength in memory chip production, favorable product mix effects, and effective cost controls at the semiconductor equipment manufacturer.

The firm anticipates order momentum will build before the end of 2025 for deliveries scheduled in late 2026 and 2027. Despite ASML’s recent stock price rally, Morgan Stanley believes the current share price still reflects conservative assumptions including flat layer count, weak China demand, and minimal sales from major customers Intel and Samsung.

The upgrade comes as semiconductor equipment makers face industry-wide questions about the sustainability of AI-driven demand and the pace of recovery in memory chip production, areas where Morgan Stanley now sees more favorable conditions for ASML. With a market capitalization of $372.31 billion and a P/E ratio of 34.12, ASML maintains its position as a prominent player in the semiconductor industry, supported by strong fundamentals and consistent cash flows.

In other recent news, ASML Holding NV has been actively involved in several developments. The company announced a significant €1.3 billion investment in Mistral AI, acquiring an 11% stake and forming a strategic partnership to explore AI applications across its product portfolio. This collaboration aims to enhance ASML’s offerings in lithography systems. In terms of analyst ratings, UBS has reiterated its Buy rating on ASML with an increased price target of €750, citing a projected 20% earnings per share compound annual growth rate from 2026 to 2030. However, BofA Securities has lowered its price target to €724, maintaining a Buy rating due to concerns over booking estimates affected by macro and geopolitical uncertainties. Additionally, Erste Group downgraded ASML’s rating from Buy to Hold, pointing to uncertainties in revenue growth prospects for 2026. These developments reflect a mix of optimism and caution among analysts regarding ASML’s future performance.

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