Arm Holdings PLC (NASDAQ: ARM) ended in the red on Tuesday after a New Street Research analyst issued a dovish call on the chip design company.
Arm shares have more than doubled alreadyPierre Ferragu downgraded the Nasdaq-listed firm this morning to “neutral” citing an “unattractive risk-reward” now that its shares have more than doubled since the start of this year.
He agreed that $ARM could trade at up to 40 times fiscal 2028 EBIT if the semiconductor behemoth performed at the “top of its game” – but opted for a dovish stance since Arm stock is already trading above that level at writing.
New Street Research’s call on the British company arrives only weeks after it reported a blockbuster fiscal third quarter and issued impressive guidance for the future.
Watch here: https://www.youtube.com/embed/I2xcTIXpSxY?feature=oembedArm stock valuation is hard to justifyPierre Ferragu warned clients against holding Arm stock today because its valuation can only be justified if it tops quarterly expectations by 50% at least.
We would see a rationale to buy the stock today only if it can deliver a 15% return. Even with a 40x forward multiple in 2027, we don’t see that possible with the stock above $110.
$ARM ARM Holdings looking for a 50x multiple… and this isn't a bubble? This valuation is Covid $ZM on steroids. pic.twitter.com/Hpkf4WYLLw
— Stone Fox Capital (@Stonefoxcapital) February 26, 2024Note that Arm chips power almost every smartphone in the world. Among the company’s prominent customers are Microsoft, Apple, Google, and even Nvidia Corp.
Rene Haas – the chief executive of Arm Holdings PLC expects continued focus on artificial intelligence to be a meaningful tailwind for $ARM.
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