On Monday, Rosenblatt Securities maintained a positive stance on Arm Holdings (NASDAQ:ARM) stock, maintaining a Buy rating with a $180.00 price target. The firm sees Arm Holdings as a top pick in the sector, on par with industry leader NVIDIA (NASDAQ:NVDA). The endorsement follows Arm's display of its PC and compute capabilities at the recent Computex event in Taiwan.
The firm's analysis indicates that Arm's intellectual property (IP) will likely gain wider adoption in the future, which is a positive sign for the company's shares. Rosenblatt's update includes an adjustment to the licensing revenues forecast for upcoming quarters to better match the timing of revenue recognition. However, the firm's projections for full-year fiscal year 2025 sales and Non-GAAP Earnings Per Share (EPS) remain the same.
The Computex event, which took place last week, served as a platform for Arm Holdings to showcase its strengths in the PC and overall compute space. Rosenblatt's reiteration of the Buy rating suggests confidence in the company's ongoing and future market performance based on these themes.
The price target of $180.00 reflects Rosenblatt's assessment of Arm Holdings' potential in the market, especially considering the increasing importance of its IP. This valuation is based on the firm's analysis and expectations of the company's financial trajectory.
Rosenblatt's commentary underscores the firm's belief in the strategic positioning of Arm Holdings within the technology sector. The unchanged full-year fiscal year 2025 sales and Non-GAAP EPS estimates imply a steady outlook for the company's financials, despite the adjustments in licensing revenue projections for the near term.
In other recent news, Arm Holdings has seen an upward revision in its stock target following record revenue growth for two consecutive quarters. The increased revenue, which surpassed expectations at $928 million, was largely due to a rise in non-royalty income, particularly licensing, and an increase in royalty rates. Bernstein SocGen Group has updated its outlook on Arm, raising the price target from $72 to $92, while maintaining an underperform rating on the stock.
Arm Holdings has also reported exceptional Q4 results for fiscal year 2024, with revenues soaring by 47% year-over-year. The company attributes this growth to the widespread adoption of its v9 technology and increased investment in artificial intelligence (AI) research and development. Arm anticipates over 20% revenue growth in the upcoming year, aiming to reach $4 billion in revenue.
Despite these positive trends, Arm's guidance for fiscal year 2025 did not exceed investor expectations. The forecast for Q1 revenue is set at $900 million, with full-year revenue projected at $3.95 billion. However, licensing revenues are expected to rise in the second half of the year.
Arm's expansion into AI chip design has been met with skepticism, yet the company continues to see positive signs in data center and laptop markets. Bernstein SocGen Group anticipates adjusted EBIT margins for Arm Holdings to reach 49% by fiscal year 2026 and 50% by 2027, influenced by higher licensing revenues and market share gains in the data center sector. These are among the recent developments for Arm Holdings.
InvestingPro Insights
Rosenblatt Securities' bullish outlook on Arm Holdings aligns with some key metrics and analyst revisions as per InvestingPro data. With a market capitalization of $142.08 billion and robust revenue growth of 20.68% over the last twelve months as of Q4 2024, Arm's financial health appears to be on solid ground. Additionally, the company's gross profit margin stands impressively at 95.24%, reflecting strong operational efficiency. It's also worth noting the significant price appreciation, with a 114.77% return over the last year, which could capture the interest of growth-focused investors.
Two InvestingPro Tips that resonate with Rosenblatt's positive stance are that net income is expected to grow this year, and seven analysts have revised their earnings upwards for the upcoming period. These indicators suggest that the market is optimistic about Arm's future performance. For investors seeking more in-depth analysis, there are 16 additional InvestingPro Tips available, which can be accessed through the InvestingPro platform. As an incentive, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
While the P/E ratio is high at 468.07, indicating a premium valuation, the company's recent performance and the positive revisions by analysts could justify investor confidence in the stock. Moreover, the substantial return over the last month of 25.48% further highlights the market's current bullish sentiment towards Arm Holdings.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.