Robinhood shares gain on Q2 beat, as user and crypto growth accelerate
Wednesday
Bernstein analysts maintained their Underperform rating on ARM Holdings (NASDAQ:ARM) shares with a steady price target of $100.00. ARM Holdings reported a strong quarter, particularly in licensing, which has led to a modest upgrade in their FY25 guidance. The company saw an increase in royalties, largely due to the adoption of v9, which commands higher royalty rates. Despite the percentage of royalties tied to v9 remaining constant at 25% for the third consecutive quarter, networking and IoT sectors experienced sequential growth, showing signs of a cyclical recovery. InvestingPro data shows impressive revenue growth of 25.7% over the last twelve months, with analysts expecting 23% growth in FY2025.
ARM’s growth in royalties can be attributed to the widespread adoption of its v9 technology, which yields higher royalty rates. The total number of Total (EPA:TTEF) Access licensees has now reached 40, marking an increase from the previous quarter. Additionally, China’s contribution to ARM’s revenues has grown, representing approximately 25% of total revenues, compared to 23% in the second quarter and 13% in the first quarter. The company’s reported revenue reached $983 million, surpassing the guidance of $945 million as well as consensus estimates of $947 million and Bernstein’s own forecast of $971 million.
The company’s operating margin stood at 45%, and its adjusted diluted earnings per share (EPS) of $0.39 also exceeded market expectations. Despite these positive results, Bernstein analysts expressed concerns over the company’s valuation, noting that the stock’s multiple has expanded with little change to estimates over the last nine months. The analysts acknowledged ARM’s promising long-term prospects but found the current stock valuation challenging to justify. This aligns with InvestingPro data showing high valuation multiples, including a P/E ratio of 221 and an EV/EBITDA of 273. For deeper insights into ARM’s valuation metrics and 14 additional ProTips, subscribers can access the comprehensive Pro Research Report.
In other recent news, Arm Holdings has seen a flurry of activity from various analyst firms. Loop Capital raised the stock target for Arm Holdings to $195, following the company’s strong revenue and EPS for the December quarter. Guggenheim also increased its price target to $180, noting the company’s royalty revenues exceeded forecasts. Rosenblatt Securities adjusted its outlook for Arm Holdings, increasing the price target to $225, based on an analysis of the company’s financial projections. Mizuho (NYSE:MFG) Securities updated its assessment, raising the price target to $180 following Arm Holdings’ financial report for the December quarter. Lastly, Jefferies adjusted the price target for Arm Holdings, raising it to $195, forecasting a significant 24% revenue growth for the fiscal year 2025. These are recent developments that have occurred with Arm Holdings.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.