BNP Paribas Exane upgrades Arm Holdings stock on ASIC potential

Investing.com - BNP Paribas (OTC:BNPQY) Exane upgraded Arm Holdings (NASDAQ:ARM) from Neutral to Outperform on Wednesday, nearly doubling its price target to $210.00 from $110.00. The stock, currently trading at $150.83, has shown strong momentum with a 19.25% year-to-date return, according to InvestingPro data.

The upgrade comes as the investment firm’s research identified Arm’s emerging role in the application-specific integrated circuit (ASIC) chip market, which is projected to reach a $200 billion total addressable market by 2030. ARM’s strong financial position, with a current ratio of 5.2 and minimal debt-to-equity of 0.05, positions it well for this opportunity.

BNP Paribas Exane believes Arm is positioned to capture part of the Softbank-led Stargate Project, described as "the largest AI infrastructure project in history" by President Trump.

The firm’s analysis suggests ASICs alone could double Arm’s EBIT by fiscal year 2031 with just 7% market share, yet this opportunity doesn’t appear fully priced into the stock despite its recent rally.

BNP Paribas Exane’s fiscal year 2031 estimates for Arm are approximately 100% ahead of consensus, with their sum-of-parts valuation indicating only about 20% of the ASIC opportunity is currently reflected in the share price. With revenue growth of 23.94% and an overall "GOOD" financial health score from InvestingPro, which offers 13 additional key insights about ARM’s valuation and growth prospects in its comprehensive Pro Research Report.

In other recent news, Arm Holdings has seen several developments impacting its financial outlook and market position. Mizuho (NYSE:MFG) raised its price target for Arm Holdings to $180, citing growth prospects in AI and increased fiscal 2026 and 2027 estimates for revenue and earnings per share (EPS). Guggenheim also raised its price target to $187, highlighting increased visibility in Arm’s license revenue, which is expected to boost royalty revenue growth over the next few years. Benchmark, however, maintained a Hold rating on Arm stock, noting the company’s premium valuation despite strong performance drivers such as robust royalty and licensing revenue.

Goldman Sachs initiated coverage on Arm Holdings with a Neutral rating and a $160 price target, acknowledging the company’s dominant position in the smartphone market and potential in data centers. Mizuho maintained its Outperform rating with a $160 target, projecting steady growth in licensing and royalties and emphasizing Arm’s advancements in the server CPU market and partnerships with companies like Qualcomm (NASDAQ:QCOM) and Apple (NASDAQ:AAPL). These recent developments indicate a mixed outlook from analysts, with some expressing optimism about Arm’s growth potential while others remain cautious due to valuation concerns.

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