ASML rises after Morgan Stanley upgrade on positive growth inflection

Investing.com -- Morgan Stanley has upgraded ASML to Overweight from Equal-weight, citing the potential for positive earnings revisions and a cyclical recovery into 2026–27. 

Shares in the world’s biggest supplier of computer chip-making equipment rose around 3% in European trading. 

The bank lifted its price target to €950 from €600, implying around 20% upside from the last closing price, and raised its bull case to €1,400 from €1,200 while keeping its bear case unchanged at €400.

Analyst Lee Simpson expects ASML’s fiscal 2027 (FY27) earnings per share (EPS) to reach about €33, roughly 8% above consensus, citing “incremental strength, especially in memory.”

“We think the market has yet to acknowledge cost controls, strengthening memory spend, and mix effects on margin,” he added. The analyst said the upgrade also reflects “the end of the negative revision cycle” with momentum expected to shift toward the 2027 debate.

While ASML has flagged near-term caution into 2026, Simpson argues that consensus already reflects muted growth expectations.

He forecasts a pickup in 2027 after three years of relatively flat earnings, driven by stronger memory demand, a broadening of leading-edge logic investments, and dissipating headwinds from Intel and China.

Simpson also highlights that memory pricing remains a key leading indicator for capex strength, and that “consensus earnings estimates are beatable.”

ASML’s valuation shows a strong correlation to DRAM spot prices, and Morgan Stanley’s global team has turned more bullish on memory, with greenfield investments by Samsung and SK Hynix expected to support EUV demand.

Despite the recent rally, the bank argues the share price still reflects assumptions of flat layer count, weak China, and minimal sales from Intel and Samsung.

Longer term, it sees AI as a driver of leading-edge wafer starts, with potential for ASML to benefit from broadened customer investment beyond TSMC.

Risks to the call include stagnation in logic demand, weak memory spending, and softer China demand.

Overall, Simpson views the risk-reward on ASML as skewed to the upside.

“Earnings upgrades that drive a view ahead of consensus estimates while the stock trades on a valuation below its historical average is an attractive setup,” Simpson said.