Goldman Sachs initiates Arm Holdings stock with Neutral rating, $160 target

Investing.com - Goldman Sachs initiated coverage on Arm Holdings (NASDAQ:ARM) with a Neutral rating and a $160 price target on Thursday. The company, currently trading at $148.02, shows strong financial health according to InvestingPro analysis, with a P/E ratio of 173x and impressive revenue growth of 24% over the last twelve months.

The investment bank expects Arm to maintain its dominant position in the smartphone market while increasing its penetration in the datacenter segment as hyperscalers increasingly deploy custom ARM-based CPUs.

Goldman Sachs also anticipates Arm will unlock higher value through increased royalty rates, specifically citing the v8 to v9 transition and greater adoption of Compute Subsystems (CSS).

Despite these positive factors, Goldman Sachs believes the potential upside from Arm’s growing datacenter market share and higher royalty rates is already well understood by investors and reflected in the current stock price.

The firm notes its 2026/27 EPS estimates align with consensus, and with Arm trading at 80 times next-twelve-months consensus EPS, Goldman Sachs sees limited upside potential for the stock.

In other recent news, Arm Holdings reported record-breaking fourth-quarter results, with revenues surpassing $1 billion for the first time. The company achieved $1.241 billion in revenue and earnings per share of $0.55, exceeding Wall Street’s expectations. Annual revenue for fiscal year 2025 crossed the $4 billion mark, with royalty revenue alone surpassing $2 billion. Mizuho (NYSE:MFG) maintained an Outperform rating for Arm Holdings, raising its price target to $180, citing the company’s potential growth in AI and partnerships with firms like Softbank (OTC:SFTBY) and META (NASDAQ:META). Guggenheim also raised its price target to $187, noting increased visibility in Arm’s license revenue and extending its hyper-growth period in its valuation model. Benchmark reiterated its Hold rating, acknowledging Arm’s strong performance drivers but citing its premium valuation as a reason for caution. Mizuho projects a steady growth trajectory for Arm, anticipating a 7-10% increase in licensing and a 20% compound annual growth rate in royalties over the next few years. Arm’s expansion in data centers and other computing segments is seen as a significant growth driver beyond its traditional smartphone market.

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