BofA just named this stock a top semis pick for 2026

Investing.com -- Bank of America (BofA) has placed ASML among its top semiconductor picks for 2026, arguing that the company is entering a multi-year upturn built on rising lithography intensity, accelerating earnings and a step-change in free cash flow.

The bank reiterates a Buy rating and lifts its price objective to €1,158 from €986. Analysts led by Didier Scemama expect 2027 to mark a clear inflection as ASML captures a larger share of customer spending and benefits from a stronger product mix.

ASML is one of BofA’s “25 stocks for 2026,” and is on its Europe 1 list of top ideas.

The expected re-rating is underpinned by three forces, including the anticipated higher lithography intensity in memory as DRAM makers add more EUV layers, a roughly 150-basis-point gross margin (GM) expansion leading to around 30% earnings growth, and free cash flow doubling to €14 billion.

Lithography intensity has remained resilient and is set to rise toward an estimated 26% by 2028, supported by ASML’s increasing share of spending as EUV layer counts increase in DRAM.

Analysts also see several long-standing concerns fading. The team argues that customer concentration risk is easing as Samsung regains competitiveness, Micron accelerates EUV adoption, Intel stabilizes and AI chipmakers move to more advanced nodes.

It expects China’s contribution to normalize in the low-to-mid-20% range of sales, helping shift investor perception from a “WFE minus” to a “WFE plus” story.

This transition should be reinforced by an expected 5 percentage-point expansion in gross margins by 2030 and a projected compound annual earnings growth (CAGR) rate of 18% over the next five years.

Forecasts for 2026 and 2027 have been raised modestly, with BofA now expecting ASML to ship 55 low-NA EUV tools next year and 63 in 2027, above earlier assumptions.

BofA also expects ASML to report €7.4 billion in fourth-quarter 2025 orders, driven by DRAM and foundry customers and ahead of the roughly €6 billion consensus. ASML will stop reporting bookings from the first quarter of 2026, and analysts expect the management instead to provide more detail on backlog maturity and end-market dynamics.

The Dutch chip equipment maker is expected to guide to mid-single-digit revenue growth for 2026, flattish margins, operating-expense growth of 6–7%, and voice confidence in stronger revenue growth for 2027. BofA’s estimates now stand 3% above consensus for 2026 EPS and 9% above for 2027.

The bank projects meaningful cash generation as inventories normalize, supporting a planned €15.5 billion buyback in 2026 and €6.4 billion in dividends over 2026–27. By the end of 2027, ASML is expected to return roughly 93% of free cash flow to shareholders.

You May Also Be Interested In

• Corning (GLW) files for up to $2B offering of common shares
• Zenas BioPharma (ZBIO) files for up to 7M share offering by selling stockholders
• Goldman, BofA vie to manage Anthropic employee wealth post-IPO - report