Morgan Stanley maintains Overweight on ASML, with a €1,930 target price

Overview

Morgan Stanley re-engaged with ASML following its second-quarter results. The core conclusion is that the medium-term investment case should not focus solely on demand for the number of EUV systems. The report emphasizes value capture from product upgrades, DRAM-related immersion lithography demand, and capacity expansion flexibility as the primary bases for maintaining the Overweight rating and €1,930 target price.

Core views

The core views are: first, management prefers to achieve ASP increases through the introduction of new EUV products rather than broad-based repricing, with the 3800F and 3800G as key catalysts; second, immersion lithography is supported by higher attach rates at newly built DRAM fabs, but as productivity gains in water-based lithography approach physical limits, dollar revenue growth may broadly track EUV; third, ASML's existing cleanroom capacity can exceed the announced 30% increase, and if customer demand visibility improves in 2028-2029, the company could increase output sooner; fourth, buybacks are running at approximately $5 million per day, while selective M&A may be possible in panel lithography or 3D chip integration.

Analysis framework

The report uses company communication notes, peer comparisons, product-cycle analysis, and a relative valuation framework. The analysis focuses on value capture from new EUV products, immersion equipment attach rates in DRAM, WFE peer growth differentials, capacity bottleneck flexibility, cash deployment, and P/E valuation assumptions.

Methodology notes

• Valuation methodsP/E multiple valuation

  P/E valuation

  The report applies a 35x P/E multiple to FY28 EPS of €56.42 to derive an ASML target price of €1,930; 35x is at the upper end of the usual cycle-peak valuation range of 30-35x.

• company_analysisProduct cycle pricing analysis

  Product cycle and value capture

  Management believes that ASP increases will primarily come from the introduction of new EUV products rather than broad-based price increases; the 3800F and 3800G offer clearer value-capture potential because of their throughput improvements.

• industry_analysisPeer comparison

  Semiconductor equipment peer comparison

  The report compares the growth drivers of Lam, KLA, ASMI, and ASML, noting that Lam may outperform WFE, KLA may come in below WFE in 2026, and ASML is balancing its DRAM/EUV strengths against headwinds from China demand.

Asset mapping & comparison

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

• ASML Holding NV

  Core covered stock; maintains Overweight and Top Pick designation

  Strengths

  Leadership in EUV technology, strong DRAM/EUV demand exposure, ASP catalysts from the 3800F/3800G launches, and remaining flexibility for capacity expansion.

  Weaknesses

  Sales in China are slowing in 2026, while room for productivity improvements in immersion lithography is approaching physical limits.

  Comparison

  Relative to Lam, ASML is more focused on EUV and lithography value capture; relative to KLA, ASML has stronger DRAM/EUV exposure but faces greater China headwinds.

  Risks

  Weaker end demand, delayed orders, insufficient High NA adoption, inflation, and weakness in the Chinese market.

• Lam Research

  Peer comparison stock

  Strengths

  Exposure to DRAM, NAND, logic, and advanced packaging, supported by TSV etch, the migration from HBM3 to HBM4, rising ALD share, and NAND capex.

  Weaknesses

  The report does not detail Lam's principal weaknesses.

  Comparison

  Morgan Stanley said Lam appears to be implying that it can outperform WFE.

  Risks

  The source text does not provide sufficient evidence.

• KLA

  Peer comparison stock

  Strengths

  May outperform WFE in 2027 due to a low base in 2026.

  Weaknesses

  More weighted toward logic, with lower memory intensity, weaker pricing upside, and margin pressure.

  Comparison

  The team believes KLA will underperform WFE in 2026 and may only outperform in 2027.

  Risks

  Logic demand and margin pressure.

Key data

• RatingOverweightMorgan Stanley maintains its stock rating on ASML.
• Target price€1,930Based on a 35x FY28 P/E valuation.
• Current share price€1,440.00Closing price as of July 30, 2026.
• FY28 EPS estimate€56.42Morgan Stanley's FY28 EPSe used for target-price valuation.
• EUV/immersion ASP growth consensusapproximately 5% through 2027The report believes the 3800F's throughput improvement could deliver value capture above this level.
• EUV revenue growth referenceapproximately 25% CAGRImmersion lithography dollar growth could broadly track EUV.
• Capacity increaseapproximately 30% announcedManagement indicated that this increase can largely be achieved within existing cleanrooms and is not a hard ceiling.
• Buyback paceapproximately $5m per dayManagement suggested that this pace could continue through the remainder of the quarter.

Impact & implications

The report's investment implications for ASML are positive: if new EUV products drive ASP increases as scheduled, DRAM capital spending exceeds expectations, and customer visibility into 2028-2029 demand improves, ASML's revenue, earnings, and valuation multiple still have room to rise. However, slowing sales in China, weaker end demand, an inflationary cycle, and insufficient High NA adoption could weigh on orders and valuation.

Risks

• End demand from foundries or DRAM is significantly weaker than expected.
• A strong inflationary cycle and weakness in the Chinese market cause growth to slow and more orders to be delayed.
• High NA is not adopted for DRAM after 2028, potentially suppressing the valuation multiple.
• Slowing sales in China offset the strengths of DRAM/EUV demand.
• If customer visibility into 2028-2029 demand remains insufficient, the pace of early capacity expansion may be constrained.

What to watch

• The 3800F launch in 2027, customer adoption, and the pace of pricing realization.
• Product progress and ASP contribution from the 3800G around 2029.
• Whether immersion lithography attach rates at newly built DRAM fabs remain approximately 2:1.
• Whether customer visibility into 2028-2029 demand improves, triggering earlier capacity expansion.
• Whether slowing sales in China develops into more pronounced order pressure.
• The sustainability of the approximately $5m-per-day buyback pace, as well as selective M&A in 3D integration or panel lithography.