I move from sell to hold. Paid customer commitments and completed price increases weaken the case that faster machines will cool demand. The market is about right after the retreat, with a twelve-month target of $1,806.59.
Key points
- €59.7 billion of 2028 sales would justify today's price under my assumptions.
- 68% growth in Q3 services and upgrades shows customers pay for higher output.
- $1,806.59 a share is my twelve-month target, replacing the sell with hold.
The call
The market is about right after the retreat. At my chosen valuation, today's price requires €59.7 billion of 2028 sales and a 58% gross margin, meaning sales left after production costs. That is demanding, but no longer a reason to bet against customer expansion.
Services and upgrades sell more capacity (€ billions)- Reported service and upgrades
- My forecast
ASML quarterly statements and calls through October 14, 2026; Q4 is my forecast aligned with guidance.
I withdraw the sell because the demand brake has not appeared. Faster machines are generating lucrative upgrades, while customers are paying deposits for future deliveries. Completed price increases strengthen 2028 earnings. TSMC's raised factory-equipment budget independently supports the expansion, although it cannot guarantee ASML orders.
Valuation
| My forecast or assumption | Figure |
|---|
| 2028 revenue | €64 billion |
| 2028 gross margin | 58% |
| 2028 diluted earnings, translated into dollars | $69.48 a share |
| Core October 2027 earnings multiple | 25 times |
| Unique-technology premium added to multiple | 1 times |
| Twelve-month target | $1,806.59 a share |
Earnings deduct €8.2 billion of operating expenses, assume a 17% tax rate and 380 million diluted shares, and translate at $1.10 per euro, excluding investment revaluations. The extra valuation turn rewards scarce technology and agreed pricing, but disappears if customers stop competing for delivery slots. Elevated interest rates and slowing growth beyond the next expansion limit the multiple; the remaining gain supports hold rather than buy.
The target depends on keeping higher marginsMy October 2027 targets by 2028 gross margin; €64 billion sales, 26 times earnings; calculated October 14, 2026.
Risks
- Orders could exaggerate lasting demand; watch customer delivery postponements and weaker deposits rather than treating deposits as disclosed bookings.
- Upgrade profits could fade as expansion costs rise; watch gross margins and service revenue together, not headline earnings alone.
- Export restrictions or a weaker euro could reduce dollar earnings; watch enacted licensing changes and currency translation, not proposed-policy headlines.
What would change my mind
Customer commitments and delivery plans pointing to 2028 sales above €70 billion or below €55 billion would move me away from hold.