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On Wednesday, Citi reiterated its Buy rating and $200.00 price target for Arm Holdings (NASDAQ:ARM) stock. The stock, currently trading at $124.28, shows significant potential despite trading above its InvestingPro Fair Value. Analyst targets range from $73 to $225, reflecting diverse market opinions about ARM’s future trajectory. This affirmation comes despite recent allegations by Qualcomm (NASDAQ:QCOM) of anti-competitive behavior by Arm. Qualcomm has reportedly referred these concerns to various regional regulatory bodies. The dispute follows a Delaware jury trial where Qualcomm won on two counts and the third remained undecided.
Arm Holdings has publicly refuted any claims of anti-competitive conduct. Citi analyst Andrew Gardiner believes that Arm is responding to its customers’ demands effectively. According to Gardiner, the company’s clients are increasingly acquiring more intellectual property (IP) and are willing to pay for its expedited delivery. This strategy appears to be working, as evidenced by ARM’s impressive 25.73% revenue growth and industry-leading 96.37% gross profit margin. The company’s substantial number of licenses and record licensing revenue indicate that it is not restricting its sales practices but rather adapting to the changing market needs. InvestingPro data reveals 12 additional key insights about ARM’s financial health and growth prospects.
The ongoing legal dispute between Qualcomm and Arm Holdings has led to a court-ordered mediation set for May. Gardiner notes that while the outcome of the conflict is still uncertain, there is a possibility for a settlement during the mediation. However, if unresolved, the matter could extend until a retrial later in the year.
Arm Holdings’ performance in the midst of these legal challenges showcases its ability to sustain growth and meet customer requirements. With a robust current ratio of 4.96 and a "GOOD" financial health rating from InvestingPro, the company appears well-positioned to weather current challenges. The company’s strong licensing revenue is a testament to its adaptability and customer-centric approach in the face of industry demands. As the situation develops, stakeholders are watching closely to see whether the mediation in May will lead to a resolution or if the companies will proceed to a retrial.
In other recent news, Arm Holdings reported strong quarterly financial results, exceeding both its own guidance and market expectations. The company achieved $983 million in revenue, surpassing the anticipated $945 million, with an operating margin of 45% and adjusted diluted earnings per share (EPS) of $0.39. Arm’s revenue growth was driven by increased royalties from its v9 technology, which now accounts for 25% of total royalties, and a notable contribution from the Chinese market, representing 25% of total revenues. In strategic developments, Arm is exploring selling its own chips, a move that involves recruiting from its customer base and competing with companies like Qualcomm for data center CPU deals with Meta Platforms (NASDAQ:META).
Analyst firms have responded to Arm’s performance with mixed ratings. Bernstein reiterated its Underperform rating, citing concerns over valuation despite strong results. Conversely, Loop Capital raised its price target to $195, maintaining a Buy rating, and expressed optimism for Arm’s fiscal year 2026. Guggenheim also raised its target to $180, highlighting Arm’s prospects in AI technology, while Rosenblatt Securities increased its target to $225, reflecting confidence in Arm’s long-term growth and profitability. These developments indicate a varied analyst perspective on Arm’s future, with some firms expressing caution over valuation and others showing confidence in its strategic initiatives and market position.
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