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Investing.com - Guggenheim raised its price target on Arm Holdings (NASDAQ:ARM) to $187.00 from $147.00 on Monday, while maintaining its Buy rating on the stock. The stock, currently trading at $165.46, has shown remarkable momentum with a 34% gain year-to-date, according to InvestingPro data.
The research firm cited increased visibility in Arm’s license revenue, which is expected to translate into royalty revenue growth over the next several years.
Guggenheim’s updated valuation model extends the company’s hyper-growth period to 10 years in its discounted cash flow analysis, compared to the typical 5-year period the firm uses for software companies.
The new price target implies an enterprise value to next-twelve-months revenue multiple of approximately 40.3x based on Guggenheim’s estimates.
Arm Holdings, which designs semiconductor intellectual property used in most mobile devices worldwide, has been expanding its presence in data centers and other computing segments beyond its traditional smartphone market. The company maintains impressive profitability with a 97% gross margin and operates with a moderate debt level, as revealed in the comprehensive InvestingPro Research Report, available along with 17 additional ProTips for subscribers.
In other recent news, Arm Holdings reported record-breaking fourth-quarter results, with revenues exceeding $1 billion for the first time. The company’s quarterly earnings included $1.241 billion in revenue and earnings per share of $0.55, surpassing Wall Street’s expectations. Arm’s annual revenue for fiscal year 2025 also crossed the $4 billion mark, with royalty revenue alone exceeding $2 billion. Despite these achievements, TD Cowen lowered its price target for Arm Holdings to $155, citing conservative guidance for the June 2025 quarter and uncertainties around tariffs. Guggenheim also adjusted its price target to $147, noting mixed financial performance and a lack of full-year guidance. Meanwhile, Benchmark reiterated its Hold rating due to Arm’s premium valuation, while Mizuho (NYSE:MFG) maintained an Outperform rating with a $160 price target, highlighting anticipated growth in licensing and royalties. These developments reflect a complex outlook for Arm Holdings, with strong financial results tempered by cautious future projections.
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