Goldman Sachs lifts Arm Holdings stock price target to $174

On Thursday, Goldman Sachs maintained a positive outlook on Arm Holdings (NASDAQ:ARM) shares, raising the price target to $174 from $159 while reiterating a Buy rating. The firm’s analysts highlighted Arm’s solid financial performance in the third fiscal quarter ending in December. The company saw revenue growth in both its Licensing and Royalty segments, which led to a 15% beat on non-GAAP earnings per share (EPS), excluding stock-based compensation (SBC). According to InvestingPro data, ARM has demonstrated impressive momentum with a 137% return over the past year and maintains a strong gross profit margin of 96%.

The report from Goldman Sachs acknowledged a slower-than-expected adoption of Arm’s v9 architecture, noting that it has consistently represented 25% of the company’s Royalty business for three quarters. Despite this, the analysts found reasons for optimism, including strong performance in the Compute Sub-Systems (CSS) business, increased volume in Cloud Infrastructure, particularly Arm-based server CPUs, and resilient near-term volume trends in the Internet of Things (IoT) sector. InvestingPro analysis reveals the company operates with a moderate debt level and maintains liquid assets exceeding short-term obligations, with a healthy current ratio of 4.5.

Goldman Sachs’ analysts expect that Arm Holdings will continue to experience robust growth in Licensing revenues. They also foresee a cyclical recovery in volumes and a sustained increase in royalty rates. These factors are projected to contribute to significant double-digit earnings growth for Arm Holdings at the company level by the fiscal year 2026. The company’s recent performance supports this outlook, with revenue growth of 24.6% in the last twelve months. For deeper insights into ARM’s growth potential and 14 additional ProTips, consider exploring the comprehensive research available on InvestingPro.

The positive assessment from Goldman Sachs comes after Arm Holdings reported revenue increases that surpassed expectations, particularly in its Licensing and Royalty businesses. This performance contributed to a substantial non-GAAP EPS beat in the most recent quarter.

Arm Holdings, known for its semiconductor and software design, remains a key player in the tech industry, with its architectures widely used in various computing products. The company’s growth prospects and financial health, as indicated in the Goldman Sachs report, continue to draw attention from investors and industry observers alike.

In other recent news, Arm Holdings has been in the spotlight due to several key developments. The CEO’s recent comments on the company’s role in the AI ’Stargate’ project and SoftBank (TYO:9984)’s continued support has stirred investor interest. Additionally, Mizuho (NYSE:MFG) Securities has reiterated its positive stance on the company, maintaining an Outperform rating and adjusting future earnings estimates upwards. This optimism is based on the successful ramp-up of Neoverse data center chips and the adoption of Arm’s V9 architecture driven by advancements in AI.

Arm Holdings has also been subject to analysis by other firms. Bernstein expressed concern over the company’s valuation compared to its peers, despite its strong performance and improved royalty rates. Meanwhile, Benchmark maintained a Hold rating on Arm Holdings, citing valuation concerns despite acknowledging the company’s robust industry position. UBS initiated coverage of Arm Holdings with a Buy rating, highlighting the company’s growth in AI and data center demand.

These are recent developments that have shaped the conversation around Arm Holdings. The company’s involvement in significant projects, earnings estimates, and analyst ratings are all factors that investors are closely watching. However, as the company continues to navigate through these developments, it’s important to remember that these are just snapshots of the current situation and not prognostications of the company’s future.

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