Morgan Stanley raises ASML target price, focusing on three key catalysts this summer

Overview

This is a Morgan Stanley forward-looking update and risk-reward report for ASML Holding NV. The report expects ASML to report 2Q26 results on July 15, 2026, with quarterly figures broadly in line with consensus, but there is potential to raise FY26 revenue and gross margin guidance. The authors argue that although ASML has risen about 75% year-to-date, it still trades at a discount versus U.S. semiconductor capital equipment peers such as KLA and Lam Research, and sentiment is turning to more actively recognize that valuation discount and earnings leverage.

Core views

The central view is that ASML can be seen as a summer "catch-up" trade. The report frames three debates as potential catalysts: first, whether management can validate supply capacity for around 90 Low NA EUV tools next year and further map out the expansion route; second, whether demand from Chinese memory suppliers and advanced-node-related demand may push FY28 WFE and DUV higher; and third, whether the EUV laser power roadmap, throughput improvements, and broader foundry collaboration may strengthen future pricing power and support gross margin expansion.

Analysis framework

The report analyzes the company using an earnings-preview framework, order and capacity path, EUV/DUV demand decomposition, relative valuation, and scenario valuation approach. The target price is based on FY28 EPS of €52.19 and a 35x two-year forward P/E, placing it at the upper end of the 30-35x cycle-peak valuation range. The report also compares Morgan Stanley forecasts with market consensus and presents bull, base, and bear cases.

Methodology notes

• Valuation methodsP/E multiple valuation

  Estimation of the target price using FY28 EPS and target P/E multiple

  The report values ASML in the 30-35x cycle-peak range near the upper end, using FY28 EPS of €52.19 and a 35x P/E multiple to derive a target price of about €1,830.

• scenario_analysisbull/base/bear case

  Risk-reward scenario analysis

  Bull case target price is about €2,000, base case is €1,830, and bear case is about €400. Key variables include advanced-node foundry recovery, DRAM demand, High NA adoption, export controls, and the semiconductor capex cycle.

• earnings_previewMSe vs consensus

  Comparison between Morgan Stanley forecast and consensus

  The report compares system sales, IBM sales, total net sales, gross margin, operating profit, and EPS for 2Q26 and 3Q26 to assess the direction of potential earnings surprises.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ASML Holding NV

  Research target and recommended stock

  Strengths

  EUV quasi-monopoly, improving DRAM and advanced logic demand, higher order visibility, and potential pricing power with gross margin expansion.

  Weaknesses

  Near-term market concerns on capacity constraints, FY27 order book not fully confirmed, and DUV still affected by slowing sales in China.

  Comparison

  The report states ASML is up about 75% year-to-date, but still trails peers such as KLA and Lam Research, and its two-year forward P/E is below KLA and LAM.

  Risks

  Weak end demand, order delays, delayed High NA adoption, export controls and tariffs, and lower-than-expected semiconductor capital spending.

• EUV/High NA Tools

  Core revenue and earnings driver

  Strengths

  Demand from advanced logic, DRAM/HBM, and node transitions such as 2nm/A16 supports tool demand; roadmap acceleration may support higher pricing.

  Weaknesses

  Supply expansion and customer adoption pace still need to be validated.

  Comparison

  The report treats EUV demand as a major lever for FY26 sales growth and as more reflective of ASML's long-term technology moat than DUV.

  Risks

  EUV order-book expansion running slower than expected or delayed initial sales of High NA.

• DUV and China WFE Demand

  Potential upside source

  Strengths

  Orders from Chinese memory makers including CXMT and YMTC could enter the order book before FY26 and start driving shipments from FY27.

  Weaknesses

  The company still expects weakening sales in China to pressure DUV growth.

  Comparison

  The report argues that Huawei and SMIC-related chip folding/Tau scaling signals may lift DUV intensity, creating upside potential for China sales in FY28.

  Risks

  Weakening China demand, export controls, or delayed orders.

Key data

• Target Price Change€1,660 -> €1,830Overweight and Top Pick were maintained.
• Current Share Price€1,628.40As of July 6, 2026 close.
• 2Q26 Net Sales Forecast€9.029bnAbout 3% above consensus of €8.798bn.
• 2Q26 EPS Forecast€7.15About 5% above consensus of €6.82.
• FY26 Revenue Forecast€39.4bnPreviously estimated at €37.7bn, at the upper end of the FY26 guide of €36-40bn.
• FY26/FY27 EUV Shipment Forecast75 / 92Previously 69 / 90, including High NA.
• FY28 EPS Forecast€52.19Used for valuation via 35x P/E target price.
• Base Valuation Multiple35xAt the upper end of the 30-35x two-year forward P/E range.
• Bull-Case Target Price€2,000Based on bull-case 2027 EPS of about €50 and about 40x P/E.
• Bear-Case Target Price€400Reflects semiconductor sector downside, order cuts, and weak equipment demand.

Impact & implications

If management confirms the EUV capacity path, FY28 order momentum, and improving pricing power, the market may further raise ASML's medium- to long-term earnings outlook and narrow its valuation discount versus U.S. semiconductor equipment peers. In the near term, the 2Q26 results themselves may not be the main source of surprise; upgraded guidance, order commentary, and capex visibility are more critical.

Risks

• Semiconductor industry downturn leading to order reductions.
• Weaker-than-expected recovery in advanced-node equipment demand, with key customers keeping capex tight.
• DRAM or foundry end demand weakens materially.
• China sales slowdown, inflation cycles, and export controls causing further order delays.
• EUV order-book expansion runs slower than expected, or initial High NA sales are delayed.
• Tariffs, export controls, and supply-chain costs may impact revenue, gross margin, and valuation multiples.

What to watch

• ASML 2Q26 results and management guidance on July 15, 2026.
• Whether management raises FY26 revenue and gross margin guidance.
• FY27 supply capability for around 90 Low NA EUV tools and expansion progress at the Brainport Industries Campus.
• FY28 order momentum, especially from Chinese memory suppliers, advanced logic, and DRAM/HBM demand.
• EUV laser power roadmap, High NA adoption pace, and pricing power.
• Whether ASML's valuation discount versus semiconductor equipment peers such as KLA and Lam Research converges.