Arm stock rating initiated at Market Perform by Raymond James

Investing.com - Raymond James initiated coverage of Arm Holdings (NASDAQ:ARM) with a Market Perform rating on Thursday. The stock, currently trading at $132.61, has fallen 2.37% over the past week, reflecting the volatility noted by InvestingPro analysts.

The firm cited Arm ’s ongoing transition as it gains ground in data centers, with opportunities catalyzed by artificial intelligence. Arm licenses its semiconductor intellectual property to fabless semiconductor customers and collects royalties on devices sold. This high-margin business model has yielded impressive financial results, with ARM reporting a remarkable 97.39% gross profit margin and annual revenue of $4.41 billion.

Raymond James noted that Arm is exploring a potential business model shift to become a fabless semiconductor supplier itself, which could allow it to capture more of the value chain but might lead to a reduced stock multiple. With SoftBank retaining 90% ownership, any shift would need to align with the controlling owner’s strategy. ARM currently operates with a moderate debt level and maintains strong liquidity with a current ratio of 5.59, giving it financial flexibility for strategic shifts.

The firm highlighted that data centers have grown to nearly 20% of Arm’s sales within the last two years, with exposure to Amazon, Google, and Microsoft. Arm maintains its foundation in smartphones, though with declining exposure to Arm China as well as Apple and Samsung. This diversification has contributed to ARM’s 24.81% revenue growth, with 12 analysts recently revising their earnings expectations upward according to InvestingPro data.

Raymond James also pointed out that Arm’s business comprises licenses and royalties in roughly equal parts, though this balance has shifted recently as management prioritizes higher royalties through next-generation AI/cloud infrastructure chips and related integrated systems designs, which can generate almost twice the royalties of legacy chips. Despite its strong growth story, ARM trades at a premium valuation with a P/E ratio of 171.58 and appears slightly overvalued based on InvestingPro’s Fair Value assessment. Investors seeking deeper insights can access ARM’s comprehensive Pro Research Report, available among 1,400+ US equities analyzed on the platform.

In other recent news, Arm Holdings reported strong earnings for the September quarter, with revenue and earnings per share surpassing both guidance and analyst expectations. The company also provided December quarter guidance that was slightly above initial estimates, prompting Loop Capital to raise its stock price target to $180 while maintaining a Buy rating. KeyBanc also increased its price target for Arm Holdings to $200, citing robust performance in royalties and licensing, particularly in the smartphone segment. However, UBS slightly lowered its price target to $195 due to higher operating expenses, despite acknowledging the company’s strong quarterly results.

Additionally, Arm Holdings gained market share in the microprocessor sector during the third quarter of 2025, as reported by Mercury Research. This gain came as Intel’s market position declined, with Arm benefiting from increased shipments in the server and notebook CPU segments. Meanwhile, South Korea’s antitrust regulator recently conducted an unannounced inspection of Arm’s Seoul offices as part of an ongoing investigation into the company’s licensing practices. These developments highlight the dynamic environment Arm Holdings is navigating.

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