ASML Shares Rise as UBS Upgrades, Citing Well-Understood Risks

ASML shares rise as UBS upgrades the Dutch semiconductor equipment firm, citing that risks associated with the decline in lithography intensity and concerns about China are "well understood" by the market. UBS believes that these risks are already priced into the stock, making it a good investment opportunity.

ASML Holding NV, a leading manufacturer of lithography systems, has seen its shares rise following a positive upgrade from UBS. The investment bank upgraded ASML's stock to "Buy" and raised its price target to €750, implying a 19% upside from the stock's last close at €647.60 [1].

The upgrade comes after a 20% decline in ASML shares over the past year, which UBS attributed to well-understood risks, including weaker lithography intensity and uncertainty around the Chinese market [1]. Francois-Xavier Bouvignies, an analyst at UBS, expects a turning point in 2027, driven by the production ramp of TSMC's A14 logic node and the adoption of High-NA EUV tools [1].

ASML's long-term story is anchored in 2027 and beyond, with analysts forecasting a 20% EPS CAGR from 2026 to 2030. Several nearer-term catalysts are also expected to support the stock's performance, including clarity on incremental EUV exposures and High-NA adoption at industry events in early 2026, and the launch of a new low-NA EUV model in the second half of 2026 [1].

UBS believes that the overhang of risks, particularly from the Chinese market, is becoming more manageable. ASML's revenues from the region are expected to fall 12% this year and another 20% in 2026, before normalizing at around 15-20% of sales from 2028 onwards [1].

The upgrade comes as ASML's American Depository Receipts (ADRs) saw a rise of 2.25% to $753.43 by Thursday's close, while ASML's trading price in the European market increased by 3.57% to €647.6 [2].

ASML's robust financial fundamentals, including a revenue growth rate of 26.4% over the past 12 months and a healthy gross margin of 52.5%, also support the positive outlook. UBS expects a significant performance expansion inflection point in 2027, driven by the mass production of advanced process nodes by major clients like TSMC, Samsung, and Intel [2].

The transition of lithography machines to the "High NA era" represents a long-term positive catalyst for ASML's fundamentals. Leading chip manufacturers are expected to shift towards next-generation EUV lithography machines, enhancing ASML's long-term performance growth outlook [2].

ASML's stock has been underperforming relative to European and American stock markets in recent years due to uncertainty around its growth outlook for 2026. However, with UBS's upgrade, investors are now focusing on the company's long-term prospects and the potential for high-quality compound growth [1][2].

References:
[1] https://finance.yahoo.com/news/return-quality-compounder-asml-upgraded-074718434.html
[2] https://news.futunn.com/en/post/61708629/the-high-na-lithography-machine-moves-from-validation-to-deployment