TLDR
- Morgan Stanley upgraded ASML to “Top Pick” in European semiconductors with €1,000 price target
- Strong DRAM demand from technology transitions to 1c nodes driving growth outlook
- Analyst projects 52.3% gross margin for 2026 despite DUV system slowdown
- Samsung and SK Hynix orders expected to boost FY26 revenue
- Shares jumped 2.7% in Amsterdam trading on the upgrade news
ASML shares climbed 2.7% in Amsterdam after Morgan Stanley named the chip equipment maker its “Top Pick” among European semiconductor stocks. The bank lifted its price target to €1,000 from €975.
ASML Holding N.V., ASML
The upgrade comes after more than a year of uncertainty in the semiconductor equipment sector. Morgan Stanley analyst Lee Simpson cited strengthening demand across memory and logic chips.
The stock trades around $1,003 per share in New York with a market cap of $389 billion. ASML is up roughly 1.5% in U.S. trading.
Simpson says ASML is “riding the DRAM wave” into 2026. The company is seeing solid orders from DRAM technology transitions at major memory producers.
The shift from 1a and 1b nodes to 1c nodes is particularly important. Each transition adds more EUV layers, with 5-6 layers expected at 1c.
This increases lithography intensity and drives demand for ASML’s EUV systems. The trend supports ongoing revenue momentum in the DRAM segment.
Strong Customer Demand Pipeline
Recent management discussions reveal stronger demand visibility from Samsung and SK Hynix. Samsung may not have placed all its orders for fiscal 2026 yet.
This presents potential upside to current revenue forecasts. Morgan Stanley sees the order pipeline building through the end of the year.
Simpson forecasts a 15% decline in China demand. That’s less severe than management’s 20% guidance, suggesting room for positive surprises.
The analyst sees upside risks from DRAM and foundry spending tied to AI infrastructure. Nvidia’s recent comments on strong Blackwell demand support this thesis.
Margins Expected to Hold Steady
Morgan Stanley projects a 52.3% gross margin for 2026. That’s down just 40 basis points year-over-year despite an expected DUV systems slowdown.
Higher EUV sales and improved Installed Base Management profitability should offset DUV weakness. Simpson calls it “testament to margin control in a difficult DUV year.”
Increased 3nm production at TSMC may require additional EUV orders. These orders weren’t included in the third-quarter order book.
Morgan Stanley reiterated its Overweight rating on ASML. The analysts view recent price weakness as an attractive entry point for investors.
The bank expects consensus earnings revisions higher as the market refocuses on 2026-27 fundamentals. Leading-edge capacity expansions are being pulled forward to meet AI demand.
ASML trades at roughly 36 times trailing earnings. This multiple is standard for premium semiconductor equipment makers.
The stock’s intraday range Wednesday ran from $974 to $1,007. Shares remain close to the 50-day moving average after a strong performance earlier this year.
ASML reported third-quarter revenue of €7.5 billion in mid-October. Gross margin came in slightly above 51%, reinforcing strong demand for advanced lithography tools.
Consensus 12-month price targets cluster just under $1,000. Recent calls from Wells Fargo and JPMorgan suggest potential upside to the low-$1,100s.
The stock carries mostly Buy and Overweight ratings from analysts. This reflects ASML’s leadership position in EUV and DUV technology despite near-term cyclical concerns.
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