Bullish indicating open at $55-$60, IPO prices at $37
Investing.com - Raymond (NSE:RYMD) James raised its price target on Arm Holdings (NASDAQ:ARM) to $165 from $140 on Thursday, while maintaining an Outperform rating on the stock. According to InvestingPro data, ARM currently trades at a P/E ratio of 218x and has seen a strong return of over 32% year-to-date, though analysis suggests the stock may be trading above its Fair Value.
The price target increase follows Arm’s fiscal first-quarter results, which were in line with expectations, though its fiscal second-quarter outlook was slightly weaker than anticipated. The company’s royalty revenue grew 25% year-over-year, driven by strong data center performance despite weakness in smartphone and IoT units. InvestingPro data shows ARM maintains impressive profitability with a gross margin of 97% and operates with moderate debt levels, while its current ratio of 5.2x indicates strong liquidity.
Raymond James noted that Arm’s secular royalty rate expansion remains on track, supported by continued ARMv9 adoption. The firm expressed encouragement about early Compute Subsystem (CSS) progress at companies including Samsung (KS:005930), Microsoft (NASDAQ:MSFT), and Xiaomi (OTC:XIACF), which effectively doubles the royalty rate.
While Arm did not provide full-year guidance, management appears to be planning for high-teens growth. The company’s licensing revenue declined slightly year-over-year but exceeded Raymond James’ model, with annualized contract value growing 28%. ARM has demonstrated solid revenue growth of 24% over the last twelve months, with analysts expecting 19% growth next fiscal year. For deeper insights into ARM’s growth prospects and valuation metrics, check out the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with detailed analysis and actionable intelligence.
Raymond James cited strong v9/CSS adoption and growing data center opportunities with Nvidia (NASDAQ:NVDA)’s GB200, as well as custom CPUs at AWS, Microsoft, and Google (NASDAQ:GOOGL) as positive factors. The firm also noted management’s references to expanding into chiplets and full end solutions, which could significantly expand Arm’s serviceable addressable market.
In other recent news, Arm Holdings has seen several updates from various investment firms regarding its stock performance and market potential. Mizuho (NYSE:MFG) has raised its price target for Arm Holdings to $180, maintaining an Outperform rating, while keeping its revenue and earnings per share estimates for the June quarter steady at $1.07 billion and $0.35, respectively. Wells Fargo (NYSE:WFC) has also increased its price target to $175, highlighting the momentum in AI data centers as a key factor for expected royalty revenue growth. Additionally, BNP Paribas (OTC:BNPQY) Exane upgraded Arm Holdings from Neutral to Outperform, nearly doubling its price target to $210, based on Arm’s potential in the ASIC chip market.
Goldman Sachs initiated coverage with a Neutral rating and a $160 price target, expecting Arm to sustain its leading position in the smartphone sector and expand in the datacenter market. Guggenheim raised its price target to $187, emphasizing increased visibility in Arm’s license revenue, which is anticipated to drive future royalty revenue growth. These developments reflect a positive outlook from analysts on Arm Holdings’ potential growth in various markets.
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