ASML stock has its third upgrade in a month. What prospects do analysts see?

Morgan Stanley upgraded its rating on shares of semiconductor equipment maker ASML and now advises buying them. The bank expects the company's earnings outlook to improve and chip molding equipment orders to grow between 2026 and 2027, thanks to the AI boom. This is the third upgrade in a month. Shares of the Dutch company in September added 33% and updated the annual high, which allowed ASML to overtake SAP and LVMH on capitalization - now it is the most expensive public company in Europe.

Morgan Stanley analysts Lee Simpson and Nigel van Putten raised their recommendation on ASML shares from neutral to "above market" (Overweight), which is equivalent to a buy recommendation, Investing.com reports. They also raised their target price on the stock from €600 to €950, which implies an upside of about 17% from the closing level on Sept. 22.

This is the third upgrade in a month for the shares of the semiconductor equipment maker. Earlier, UBS and Arete Research revised their assessments. But in September, Morningstar downgraded the Dutch company's shares from Buy to Hold.

At the trading in Amsterdam on September 22, ASML shares renewed the historical maximum, rising by 2.15% to €810.8. At trading in New York, ASML's receipts rose by about 3% to $964.5, which also became their record value. Relative to September 2 (when there was a minimum value in September), ASML shares have already added 33%, making it the most expensive public company in Europe, Bloomberg noted. Previously, the largest in terms of capitalization there were software developer SAP and luxury giant LVMH.

The series of positive guidance revisions coincided with news from key AI computing infrastructure vendors, including Oracle. In addition, Nvidia's recent $5 billion investment in Intel strengthened the position of the struggling U.S. chipmaker, which is an important customer of ASML, although it has cut capital spending this year, Bloomberg writes.

Morgan Stanley believes the semiconductor equipment maker could show significant growth amid demand from the artificial intelligence industry.

"We see plenty of growth opportunities through 2027," Bloomberg quoted Simpson and Putten's note as saying. They believe logic chip and memory makers will ramp up their capacity over the next two years, which will support demand for ASML's hardware.

Analysts expect ASML's earnings per share (EPS) to reach around €33 in fiscal 2027 - about 8% above the current consensus forecast. In their note, they point to "additional strength, especially in the memory segment," notes Investing.com.

"The market has not yet factored in cost control, increased memory investment, or favorable changes in the product mix impacting margins," Simpson and Putten wrote. They believe the current improvement in the outlook signals "the end of the downward revision cycle" and the beginning of a phase where investor focus shifts to the 2027 outlook.

In the long term, Morgan Stanley sees artificial intelligence as a growth driver for launching new advanced manufacturing facilities, and ASML as one of the beneficiaries of an expanding customer base beyond contract chip maker TSMC.

UBS analyst François-Xavier Bouvigny raised his recommendation on ASML shares from neutral to "buy" in early September, Yahoo Finance reported. Bouvigny also increased the target price of the stock from €660 to €750. UBS said that risks related to declining lithography (chip molding) intensity and uncertainty in the Chinese market are already reflected in the current share price. The bank expects demand for ASML's equipment to grow by 2027 due to the introduction of new process technologies as well as capacity expansions at TSMC and other customers.

Arete Research analyst Jim Fontanelli on September 12 similarly raised his recommendation on ASML from neutral to "buy", TipRanks reported. Fontanelli also set the target on the shares at €879. The analyst pointed out that ASML will be a beneficiary of rising capital expenditure on AI infrastructure, especially from TSMC.

According to FactSet, of the 40 analysts tracking the chip molding equipment maker's stock, 27 recommend buying, 12 advise holding and one sell. The consensus target price for the stock, according to MarketScreener, is €776.6, down 4.2% from the closing price in Amsterdam on Sept. 22.

This article was AI-translated and verified by a human editor