Gold prices bounce off 3-week lows; demand likely longer term
On Thursday, BofA Securities analyst Vivek Arya adjusted the price target for Arm Holdings (NASDAQ:ARM) stock to $135.00, a reduction from the previous target of $144.00, while sustaining a Buy rating on the company’s shares. According to InvestingPro data, ARM has shown impressive momentum with a 7.6% return over the last week and maintains strong financial health with a current ratio of nearly 5x, indicating robust liquidity. Arya noted that Arm Holdings did not provide a fiscal year 2026, or approximately calendar year 2025, annual outlook, attributing this to deal closure delays and end-demand uncertainties stemming from evolving global tariffs.
The analyst projected that fiscal year 2026 is likely to see a 17-18% year-over-year sales growth, reaching approximately $4.7 billion, which falls short of the consensus estimate of $4.93 billion (a 23% year-over-year increase). Despite this, Arya anticipates that top-line growth will realign with the 20%+ annual trend from fiscal year 2027 onwards. The company’s recent performance supports this outlook, with revenue growth of 25.7% in the last twelve months and an impressive gross profit margin of 96.4%.
Arya also revised the forecasted pro forma earnings per share (EPS) for calendar years 2025, 2026, and 2027 downwards by 9%, 11%, and 11% respectively, to $1.69, $2.24, and $2.56. This adjustment reflects sustained high operational expenses due to investments in long-term growth. The new price objective of $135 is based on 60 times the projected non-GAAP earnings per share for calendar year 2026, an increase from the prior multiple of 57, which takes into account a rising royalty rate as the product mix shifts towards the more advanced v9 and compute sub-system architectures that command higher royalty rates.
Despite the reduction in the price target, BofA Securities reaffirms its Buy rating for Arm Holdings. Arya’s optimism is rooted in three key factors: the cyclical nature of the anticipated slowdown in calendar year 2025, evidenced by a mid-teens percentage year-over-year growth in Arm’s licensing contract value; progress in transitioning customers to the more advanced v9 architecture; and significant opportunities in the data center market, where Arm-based AI server and networking products are being deployed in major cloud infrastructures.
The report concluded with a reference to Arm Holdings’ after-market share price of $109.75. InvestingPro analysis suggests the stock is currently trading above its Fair Value, with analyst targets ranging from $73 to $203. Investors seeking deeper insights can access 13 additional exclusive ProTips and comprehensive valuation metrics through the detailed Pro Research Report, available with an InvestingPro subscription.
In other recent news, Arm Holdings reported a significant 18% year-over-year increase in royalty revenue, surpassing expectations due to the strong adoption of its ARMv9 architecture. Licensing revenue also grew by 53% year-over-year, although it was slightly below some analysts’ models. Despite these positive earnings, Arm Holdings has not provided explicit revenue guidance for fiscal year 2026, citing limited customer visibility and uncertainties surrounding tariffs. In terms of analyst actions, Barclays (LON:BARC) lowered its price target for Arm Holdings to $115, while Raymond (NSE:RYMD) James adjusted its target to $140, and HSBC reduced it to $95, each maintaining their respective ratings on the stock.
Additionally, Arm Holdings is in the midst of a legal dispute with Qualcomm (NASDAQ:QCOM), involving allegations of anti-competitive behavior. Citi has maintained its $200 price target on Arm Holdings, noting the company’s strong licensing revenue and adaptability to customer demands. On the merger front, Cadence Design (NASDAQ:CDNS) Systems announced plans to acquire Arm’s Artisan foundation IP business, a move expected to enhance Cadence’s design IP offerings. This acquisition is subject to regulatory approvals and is anticipated to close in the third quarter of 2025. These developments highlight the dynamic changes and challenges Arm Holdings is currently navigating.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.