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On Thursday, UBS analyst Timothy Arcuri reaffirmed a Buy rating and a $215.00 price target for ARM Holdings (LON:ARM) stock, traded on (NASDAQ:ARM). According to InvestingPro data, ARM currently trades at a P/E ratio of 227.5x and has delivered an impressive 137% return over the past year. The company’s December quarter results surpassed expectations, and while the March quarter guidance presents a broader range, the midpoint aligns with UBS and consensus estimates, providing no grounds to alter the optimistic stance.
ARM Holdings reported a December quarter that exceeded the high end of the forecast range. The company maintains strong financial health with a current ratio of 4.52 and operates with moderate debt levels. Although the guidance for the March quarter is presented with greater variability, the midpoint is consistent with UBS’s and the Street’s predictions. The analyst expressed a positive outlook, noting several encouraging signs from the quarter. These include the AWS Graviton processors achieving over 50% flow share, signs of recovery in networking equipment from inventory issues, and an uptick in CSS demand. Additionally, CSS began to contribute to royalty growth in the smartphone sector for the first time, with potential further benefits from cloud CSS yet to be realized.
According to Arcuri, ARM Holdings is poised to benefit significantly from the surge in custom ASIC activities among hyperscale companies. Despite substantial investments by the company leading to minimal operating leverage, the focus remains on revenue growth. The analyst anticipates that AI will continue to drive growth across all of ARM’s key markets, particularly the data center sector. Furthermore, royalty rates and the value of System on a Chip (SoC) in the core smartphone business are also on the rise.
The report from UBS suggests that ARM Holdings is well-positioned to capitalize on the expanding AI landscape and its effects across multiple end markets. With the company’s investments in growth and the positive trends in its main business areas, the reiterated Buy rating and price target reflect confidence in ARM’s future performance.
In other recent news, ARM Holdings has been the focus of several analyst updates. Evercore ISI raised its price target for ARM to $202 from $176, maintaining an Outperform rating. This upgrade follows the company’s impressive December quarter earnings report, which saw a 23% YoY increase in royalties, largely contributed by handset technologies and the IoT sector. In addition, ARM’s FY25 royalty growth forecast was revised upward, reflecting optimism in future revenue streams.
JPMorgan also increased ARM’s stock target to $175, maintaining an Overweight rating. The firm’s analysts expect ARM to achieve a revenue CAGR of over 20% and an EPS CAGR of over 40% in the coming years, driven by increased IP content, market share gains, and deeper penetration into growing market segments.
On the contrary, Bernstein maintained an Underperform rating on ARM, keeping the price target steady at $100. This rating comes despite ARM’s record third-quarter revenues and strong operating margin. However, the adoption of ARM’s v9 technology remained below the company’s target.
Barclays (LON:BARC) maintained an Overweight rating on ARM, with a steady price target of $155. The firm acknowledged ARM’s strong performance in various sectors, but expressed concerns about the stagnation of v9 mix.
Lastly, Citi raised ARM’s stock target to $200, maintaining a Buy rating. The firm noted momentum in various segments of ARM’s business, particularly AI, and expressed strong belief in ARM’s long-term growth prospects. These developments highlight the varying perspectives of analysts on ARM’s performance and future prospects.
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