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On Thursday, Rosenblatt Securities adjusted its price target on Arm Holdings (NASDAQ:ARM) shares, reducing it to $180 from the previous $203, while maintaining a Buy rating on the stock. The firm’s analyst cited Arm’s record fourth-quarter revenue, which surpassed consensus expectations, driven by all-time high quarterly revenue in both Licensing and Royalties segments. This performance contributed to the company’s impressive 25.73% year-over-year revenue growth. The company’s Annualized Contract Value (ACV) saw a year-over-year increase of 15%, exceeding the long-term growth forecast of mid-to-high single digits. According to InvestingPro data, ARM has demonstrated strong momentum with a 7.62% return over the past week.
Arm Holdings reported a Non-GAAP earnings per share (EPS) beat for the fourth quarter, attributed in part to operational expenditures that were deferred from the fourth to the first quarter of the following fiscal year. However, the guidance for first-quarter revenue of fiscal year 2026 was slightly below consensus at the midpoint. The management’s decision to accelerate investment in new technologies is expected to increase operational expenses above consensus, which has led to a miss in Non-GAAP EPS guidance. Despite these challenges, InvestingPro analysis shows ARM maintains a strong financial position with a current ratio of 4.96 and operates with minimal debt, as evidenced by a debt-to-equity ratio of just 0.04. Get access to 13 additional exclusive ProTips and comprehensive financial analysis through InvestingPro’s detailed research reports.
During the previous quarter, Arm observed a significant 30% year-over-year rise in smartphone royalties, while smartphone unit sales saw a modest increase of 2%. The company’s growing content per phone has been largely influenced by the adoption of its v9 technology, which now accounts for 30% of royalties, up from 25%. This growth is also supported by the increasing adoption of Arm’s Complete Subsystem (CSS) strategy. The company maintains an impressive gross profit margin of 96.37%, reflecting its strong pricing power in the semiconductor IP market.
Arm’s management has indicated that tariffs are not anticipated to directly impact the company’s business, although there may be indirect effects if customer demand is disrupted. As a result, full-year guidance was not provided. In light of the cautious outlook and anticipated higher operational expenses, Rosenblatt has adjusted its estimates downward. The new 12-month price target of $180 is based on 70 times the firm’s projected fiscal year 2027 Non-GAAP EPS. Currently trading at a P/E ratio of 160.2x, ARM’s valuation reflects high growth expectations. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value. Discover detailed valuation metrics and access comprehensive research reports covering 1,400+ US stocks through InvestingPro’s premium service.
In other recent news, Arm Holdings reported robust fourth-quarter financial results, with revenue reaching $1.24 billion, aligning with expectations. The company’s royalty revenue exceeded projections, contributing to an adjusted operating profit of $655 million, surpassing consensus estimates. However, Arm’s guidance for the upcoming June quarter fell short of market expectations, with anticipated revenue of $1.05 billion and earnings per share of $0.34, attributed to increased operational expenses. KeyBanc, Mizuho (NYSE:MFG), and JPMorgan have all adjusted their price targets for Arm Holdings, citing concerns over the company’s guidance and potential headwinds related to tariffs and trade uncertainties. KeyBanc reduced its target to $175, Mizuho to $160, and JPMorgan to $150, yet all firms maintained positive ratings, indicating continued confidence in Arm’s long-term prospects.
Morgan Stanley (NYSE:MS) also maintained an Overweight rating with a $150 price target, acknowledging Arm’s strategic investments in engineering to meet future demand. The company is experiencing strong growth in its mobile division, with a notable increase in the adoption of its Armv9 architecture. Despite the challenges, Arm Holdings is gaining traction in the data center market and expanding its presence in AI and automotive sectors. William Blair reaffirmed its Outperform rating, emphasizing the company’s solid core business and long-term growth potential, despite recent stock price volatility. Overall, analysts continue to express confidence in Arm Holdings’ ability to capitalize on emerging technology trends, despite short-term uncertainties.
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