Arm’s Stock Could Soar 57%, According to the Latest Crop of Bullish Research

Arm Holdings PLC's stock is currently trading just 6% above its initial public offering (IPO) price. However, analysts are optimistic about the future prospects of the chip-design company.

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Several analysts began covering Arm's stock on Monday, following the end of the waiting period for underwriting banks to do so. According to FactSet, the new ratings were generally positive, with at least seven analysts initiating coverage with buy-equivalent ratings and two starting with hold-equivalent ratings.

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Citi Research analyst Andrew Gardiner expressed a positive view of Arm's investment case, noting that while much has changed since Softbank acquired the company in 2016, many core aspects remain the same. Gardiner believes that Arm, which went public in mid-September, can benefit from providing additional content at higher prices in a mature market. He also sees evidence of long-awaited market-share gains in servers.

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Gardiner assigned a buy rating and a $65 target price to Arm's stock, projecting an 18% compound annual growth rate on sales through fiscal 2027 and a 36% compound annual growth rate on earnings per share.

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Rosenblatt analyst Hans Mosesmann set a $85 price target for Arm shares, indicating a 57% upside from Monday's closing price. Mosesmann emphasized Arm's potential in areas such as edge computing, AI, automotive, and IoT, considering its extensive customer and ecosystem presence over several decades.

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Guggenheim Securities analyst John DiFucci highlighted Arm's role as a foundational player in semiconductor innovation, driving value for software and internet

companies. He noted Arm's attractive business model and strong growth potential, assigning a buy rating and a $64 target price.

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JPMorgan's Harlan Sur pointed out Arm's strong visibility in customer chip design programs and royalty rates, as well as its three-year visibility on its licensing business.

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Sur noted Arm's competitive advantages, including its R&D scale and developer ecosystem, and initiated coverage with an overweight rating and a $70 price target.

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BMO Capital Markets analyst Ambrish Srivastava had a more measured stance, considering Arm's current valuation reasonable. He mentioned debates over Arm's new strategy of developing market-specific intellectual property (IP) versus general-purpose CPUs and its subscription-based licensing approach. Despite these debates, Srivastava believes that Arm's pivot will ultimately prove successful.

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