ASML Holding stock has been in a funk ever since it was reported China had made significant progress on emulating the Dutch company's chipmaking tools. That's opened up a major buying opportunity, according to analysts at UBS.

Its Amsterdam-listed shares are down about 7% since reports emerged in late July that an unnamed Chinese company was mass producing deep ultraviolet (DUV) lithography machines, used for manufacturing chips. Those aren't a match for ASML's latest extreme ultraviolet $(EUV)$ lithography but the report was enough to spook the market.

ASML shares were down 0.3% at 1,447.60 euros ($1,679.08) on Tuesday. UBS analyst Francois-Xavier Bouvignies thinks that's a big mispricing-he just raised his price target on the stock to EUR2,350 from EUR2,250. That implies an upside of 55% and would make ASML Europe's first ever $1 trillion market-valuation company.

"Our base case continues to be that China won't achieve an EUV tool within the next 10 years; looking at patents, they seem to be at a similar stage to ASML in 2004," Bouvignies wrote in a research note. "Given likely gaps in yield and throughput versus ASML, along with regulatory constraints, we see it as unlikely that Chinese lithography tools will be deployed outside China."

If shareholders can get past their fear of Chinese competition then there's plenty to be cheerful about for ASML. The company can boost its earnings power due to the increasing use of its tools, higher prices for its machines, and increasing demand from memory-chip companies, according to the UBS analyst.

Bouvignies forecasts ASML can achieve a 31% compound annual growth rate in earnings per share through 2030, reaching EUR92.90 a share at the end of the decade.

ASML currently trades at a forward price-to-earnings ratio of around 30 times, according to FactSet. That doesn't look cheap compared with other stocks in the chip sector-see Nvidia at 17 times-but Bouvignies argued it is cheap for AMSL. He noted the company only trades at a 1% premium to U.S. chipmaking equipment companies Lam Research, KLA, and Applied Materials. Over the past 15 years, that premium has averaged 67%.

"Given ASML's monopoly position and structurally stronger competitive profile, we believe such a discount is difficult to justify and leaves scope for multiple expansion," Bouvignies wrote.

ASML's American depositary receipts were down 1% at $1,679.27 Tuesday.