UBS has reiterated its 'conviction buy' rating on ASML, the Dutch semiconductor equipment maker, after third-quarter results beat expectations and fourth-quarter guidance came in well above consensus.
Third-quarter earnings before interest and tax were 5% ahead of consensus, while the midpoint of fourth-quarter guidance implies a 7% beat against analyst forecasts.
UBS expects consensus earnings per share estimates for 2027 and 2028 to rise by 5% to 10% as a result.
The bank's 12-month price target is €2,350, against a current share price of around €1,510, implying upside of around 56%.
Third-quarter net sales came in at €11.6 billion, broadly in line with consensus, though installed base management revenue of €3.3 billion was 13% ahead of expectations.
Extreme ultraviolet (EUV) system sales of €4.1 billion were 94% higher year-on-year but fell 7% short of consensus.
China system sales more than doubled quarter-on-quarter, representing 23% of product sales, though ASML continues to expect China to normalise to around 20% of group revenues for the full year.
Gross margin of 57.5% was well ahead of the 56% consensus estimate, driving the earnings beat.
For the fourth quarter, ASML guided for net sales of €14.2 billion to €15.2 billion against a consensus of €14.3 billion.
The most significant signal from the results was on future demand, with ASML noting that planned capacity increases of 30% for low-NA EUV and immersion DUV tools in 2027 and 2028 will not be sufficient to meet customer requirements.
The company received a large volume of order intake for 2028 and reported strong customer interest in placing orders for 2029 and sometimes 2030.
UBS says this points to a substantial backlog disclosure next quarter, likely well above current consensus expectations.
