BofA expects ASML stock to rise 20%. Why did he call it a favorite for 2026?
Bank of America reiterated a "buy" recommendation for semiconductor equipment maker ASML and called it its top pick in the chip sector and a key favorite for 2026, CNBC writes.
Bank analyst Didier Semama raised his target price on ASML stock from $1134 to $1331, a 20% increase from the closing price in recent trading. Semama believes ASML stock could rise due to a pivot point in lithography intensity that will allow the company to increase its share of the DRAM RAM market. He estimates it will reach about 26% by 2028.
ASML shares rose 0.5% in trading on December 3. Since the beginning of the year they have added about 60%.
Why is BofA waiting for a market reversal?
According to the analyst, after 12-18 months of controversy surrounding lithography intensity - that is, the share of capital expenditure going to lithography equipment in total global investment in chip manufacturing - things are starting to turn for the better.
Other risks related to dependence on a few large customers and the Chinese market will also, in his estimation, subside.
"The risk of dependence on individual customers is diminishing as Samsung regains competitiveness, Micron accelerates adoption of EUV (extreme ultraviolet lithography - Oninvest) technology, Intel stabilizes, and AI chip makers move to advanced next-generation nanometer process technology to differentiate themselves," the analyst wrote.
Semama believes China's share of revenue will return to a sustainable level of around 20%, easing concerns about a sharp drop in demand and possible severe export restrictions.
He now expects ASML's gross margin expansion in 2027, which will give the stock a boost. Significant improvement will come from a more favorable product mix, the analyst added.
What are other analysts saying?
JP Morgan on December 1 reiterated a buy recommendation on Amsterdam-based ASML and raised its target price from €1000 to €1100. This target implies a 17% rise in the stock relative to the last trading price.
Of the 37 analysts who track the semiconductor maker's stock, the majority - 26 - advise buying it. Ten recommend to keep the securities in the portfolio, and only one advises to sell.
This article was AI-translated and verified by a human editor
