Arm Holdings: A Promising Investment Opportunity

by Warren Seah

Praised by Wells Fargo analyst Gary Mobley, Arm Holdings (ticker: ARM) is perceived as an excellent investment within the global semiconductor industry. Mobley’s research note initiates Arm’s coverage, assigning an Overweight rating along with a $70 price target. With this forecast, the stock has the potential to achieve a 27% increase from Friday’s closing price.

Anticipating a bright future for Arm, Mobley predicts a 13% growth in its top-line for fiscal year 2024, primarily driven by forthcoming licensing deals. During the company’s fiscal second-quarter earnings call, Chief Financial Officer Jason Child expressed strong optimism, expecting significant growth due to substantial license deals arriving in Q4. These sentiments are mirrored in Mobley’s research note, where he foresees revenue growth accelerating in fiscal year 2025 through a cyclical chip recovery and higher royalty rates.

Arm, a British semiconductor company that recently went public on September 14, boasts an impressive clientele that includes tech giants like Apple (AAPL) and Alphabet (GOOGL). The company surpassed estimates with its fiscal second-quarter financial results, although its third-quarter revenue estimates of $720 million to $800 million were deemed “messy” by BofA Securities analyst Vivek Arya. Regardless of this assessment, Arya upholds his Buy rating and $65 price target, emphasizing Arm’s proven architecture and established ecosystem that positions it for market share expansion and increased royalty rates over the next three years.

As of Monday, Arm’s stock was showing a 0.8% increase, trading at $55.41.

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