Update: Morgan Stanley Upgrades ASML To Overweight (ASML)

Morgan Stanley is upgrading ASML Holding N.V. ASML to Overweight with a $40 Euro price target. In the note, Morgan Stanley writes, "ASML should be a beneficiary of accelerated production node transition in the semis industry. The technology race between the Intel and ARM camps, combined with increased demand for NAND, leads us to believe that revenues will continue to surprise on the upside in 2011, and more importantly in 2012. While we previously thought sales would peak in 2011-12, we now believe there will be a higher and much longer lithography cycle, resulting in a further re-rating of the shares. As a result, we expect ASML to trade on a P/E multiple of 10-12x on higher earnings (€3.2-3.7 for 2011-2012 versus €2.6-2.9 previously). We also believe investors are looking for derivative calls on the Intel vs. ARM debate and that ASML, a relative underperformer in the European semis sector and down c. 10% after the results, represents a good opportunity as investors do not have to bet on a winner." Shares of ASML are up 97 cents to $38.61, a gain of 2.6% after the upgrade.