Arm gets bullish ratings from JPMorgan and Barclays but pricing still a concern
Published: 08:20 09 Oct 2023 EDT
Arm Holdings PLC (NASDAQ:ARM)’s Nasdaq debut has been widely seen as a success for parent company SoftBank, which floated the British semiconductor giant in mid-September at a $54 billion valuation.
Though shares have dipped around 11%, Wall Street sees upside potential on the way, going by the gamut of broker coverage initiated on Monday.
Over 25 firms, including major financial institutions Barclays PLC (LSE:BARC) and Goldman Sachs (NYSE:GS), kicked off coverage following the post-IPO grace period.
Barclays analysts led by Blayne Curtis gave Arm an 'overweight' rating, citing its significant role in the semiconductor industry and potential for growth as more devices become intelligent and connected.
Arm’s chip designs are found in virtually every smartphone on the planet, though they could find added utility in the Internet-of-Things (IoT) and automobile industries.
Same same, only different
Citi, for instance, called the Cambridge-based firm “same as the old Arm, only better” when it initiated coverage on Monday.
“Many things have changed for Arm since it was acquired by Softbank in 2016, but much remains the same… we view both positively for new Arm’s investment case,” said Citi analysts.
They noted that Arm has long been dominant in mobile, but can now benefit from providing “additional content at higher prices into a mature market”.
As such, Arm nabbed a 'buy' rating and a $65 target price for a 20% upside on the publication price.
JPMorgan Chase & Co (NYSE:JPM) and Goldman Sachs (NYSE:GS) also gave 'buy' ratings, projecting Arm’s value to reach between $60 and $70 by December 2024.
BMO Capital Markets (NYSE:BMO) Corp. was more conservative, assigning a 'hold' rating to the stock, given shares are “reasonably valued at current levels”.
Similar to fellow semiconductor firm Nvidia – which once tried to acquire it before competition regulators stepped in – Arm shares are trading at a significant premium of more than 50-times projected earnings.
HSBC also gave Arm a 'hold' rating.
In total, Arm has received 12 'buy' ratings, six 'holds', and one 'sell', with an average price target of about $62, according to Bloomberg data.
