ASML Stock: Morgan Stanley Warns that Short-Term Upside is Limited

Investing.com - Morgan Stanley maintains an “Overweight” rating on ASML, with a target price of €1,400, but warns that the Dutch chip equipment manufacturer has limited short-term upside in 2026, with demand for extreme ultraviolet (EUV) lithography machines concentrated in the second half of the year.

The broker expects ASML to report in-line first-quarter results on April 15, with sales of €8.64 billion, at the upper end of the company’s guidance range of €8.2 billion to €8.9 billion.

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The firm forecasts a gross margin of 52.8%, 61 basis points above market consensus. As of March 23, the stock closed at €1,175.40, implying about 19% upside to the target price.

Morgan Stanley’s 2027 forecasts are significantly above Wall Street consensus, with revenue expected at €47.9 billion versus €44.49 billion consensus, and earnings per share (EPS) forecast at €46.41 compared to €38.63 consensus.

Demand for EUV lithography machines in 2026 is expected to be skewed toward the second half, driven mainly by DRAM cleanroom expansions and TSMC orders. The broker has raised its 2026 EUV DRAM shipment estimate from 19 to 22 units, and its total EUV lithography shipment forecast for 2027 from 80 to 84 units, citing increased capital expenditure by Micron Technology.

Morgan Stanley states: “This strong DRAM demand supports our new forecast of 84 EUV lithography system shipments in 2027.”

Supply constraints for immersion deep ultraviolet (DUV) lithography machines from optical supplier Carl Zeiss are easing, after previously causing 2026 shipments to fall below 2025 levels and dragging on margins. The broker describes this as a mismatch following a sharp demand surge from October to November 2025 (mainly related to artificial intelligence).

In the Chinese market, Morgan Stanley has lowered its 2026 revenue share estimate from 27% to 21%, implying an 18% year-over-year decline, consistent with management guidance. The firm has raised its 2027 China market estimate from 21% to 18%, reflecting expectations of a recovery in storage chip spending.

In light of these adjustments, Morgan Stanley has raised its 2026 EPS estimate by 41 basis points to €30.09 and its 2027 EPS estimate by 8 basis points to €46.41. The broker values ASML at 31 times its 2027 EPS forecast, resulting in a target price of €1,400. Its bullish scenario is €2,000, and bearish scenario is €400.

According to analyst data tracked by Refinitiv, 78% of analysts rate ASML as “Overweight,” 17% as “Hold,” and 6% as “Underweight.”