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Investing.com - Morgan Stanley has lowered its price target on Arm Holdings (NASDAQ:ARM) to $171.00 from $180.00 while maintaining an Overweight rating on the stock. The company, currently trading at $166.77, has shown significant momentum with a 56% return over the past six months, though InvestingPro data indicates the stock is trading in overbought territory.
The price target reduction comes as Morgan Stanley adjusted its estimates for Arm’s fiscal year 2027, though the firm remains positive on the company’s overall outlook.
Morgan Stanley noted that despite operating expense expansion, it expects licensing and royalties to support Arm’s second-quarter earnings performance.
The firm highlighted long-term prospects for custom chip development and core business growth as key factors supporting its investment thesis, suggesting the current price represents "an attractive entry point" for investors.
Morgan Stanley’s analysis indicates continued confidence in Arm’s business model, with the modest price target reduction reflecting specific adjustments to longer-term estimates rather than fundamental concerns about the company’s strategy or market position.
In other recent news, Arm Holdings reported its latest quarterly earnings, which met market expectations but did not exceed them. The company experienced solid growth across most major metrics, marking its second-best quarter ever. Despite this, the outlook aligned with expectations, offering no additional upside for investors. In a related development, Raymond James raised its price target for Arm Holdings to $165 from $140, maintaining an Outperform rating, following Arm’s fiscal first-quarter results. These results showed a 25% year-over-year growth in royalty revenue, primarily due to strong data center performance, although there was noted weakness in smartphone and IoT units. Additionally, Evercore ISI increased its price target for Arm Holdings to $178 from $173, also maintaining an Outperform rating after meetings with Arm’s executive team. Meanwhile, Arm is seeking to expand its presence in Southeast Asia to capitalize on the growing demand for data centers and artificial intelligence in the region. Lastly, Qualcomm’s decision to adopt Arm’s ninth-generation computing architecture for its chips could potentially boost Arm’s revenue as competition in the semiconductor market intensifies.
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