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Arm Holdings target lifted at Bernstein but 'valuation looks very full'

Published 05/16/2024, 08:32 PM
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ARM
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Bernstein upped the price target on Arm Holdings (NASDAQ:ARM) to $92 from $72 on Thursday, although the investment firm maintained an Underperform rating on the stock.

Assessing Arm's recent earnings release, analysts noted that it posted second consecutive quarter of record revenue ahead of expectations at $928 million, but said that once again it was non-royalties (licensing) that drove the top line beat.

In addition, it is believed the guidance for FY25 wasn't the beat and raise that investors seemed to be looking for.

Furthermore, analysts find the recent commentary of Arm getting into AI chip design hard to believe. This is due to the un-serviced demand they see in their core business around CSS and and the recent challenging experience of trying to expand into services under Softbank.

"Data centre and laptop momentum are continuing to show good signs of progress, and Arm is now progressing CSS for automotive applications," notes Bernstein.

Analysts conclude: "While the outlook for growth looks strong, we continue to believe that Arm valuation looks very full, even when valuing them at a premium to seemingly also full-valued peers."

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