Tuesday - Goldman Sachs has raised the price target on Arm Holdings shares (NASDAQ:ARM) to $143.00 from $110.00, while maintaining a Buy rating on the stock. The increase follows recent meetings at Computex, which have reinforced the firm's confidence in Arm's position in the industry.
According to the investment firm, Arm is poised to continue as the preferred architecture across most product categories at the Edge, and its presence is expected to grow in the Data Center sector. The firm's optimism is based on the traction Arm's technology is gaining with both existing and new customers, including notable names like AWS, Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), and Google (NASDAQ:GOOGL).
Goldman Sachs notes that in a world where power efficiency is increasingly important, Arm's architecture is likely to capture more market share in Server CPUs. This trend is supported by strong momentum with current customers and early successes with newer clients.
The firm remains positive about the investment in Arm due to the widespread adoption of Arm-based processors across various cloud services and the transition from v8 to v9 architecture, which is anticipated to bring higher royalty rates. These factors are expected to contribute to continued margin expansion and earnings growth.
Goldman Sachs forecasts a compound annual growth rate (CAGR) of approximately 24% in revenue and around 30% in non-GAAP EPS (excluding SBC) through FY27 for Arm Holdings. These growth rates are projected to outperform the median of the companies covered in the Semiconductor and Semiconductor Capital Equipment sectors.
In other recent news, Arm Holdings has been the focus of several significant developments. Rosenblatt Securities maintained a Buy rating on Arm Holdings, emphasizing the company's PC and compute capabilities. This follows Arm's impressive display at the Computex event in Taiwan, where it showcased its strengths in the PC and overall compute space. The firm's analysis suggests that Arm's intellectual property will likely gain wider adoption in the future, a positive sign for the company's shares.
In terms of earnings and revenue, Arm Holdings reported exceptional Q4 results for fiscal year 2024, with revenues increasing by 47% year-over-year. This growth was attributed to the widespread adoption of its v9 technology and increased investment in artificial intelligence (AI) research and development. The company anticipates over 20% revenue growth in the upcoming year, aiming to reach $4 billion in revenue.
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. This adjustment follows Arm's report of a second consecutive quarter of record revenue, which exceeded expectations at $928 million.
The firm 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 the recent developments for Arm Holdings.
InvestingPro Insights
With Goldman Sachs setting a higher price target for Arm Holdings, investors are keenly watching the company's performance metrics. According to real-time data from InvestingPro, Arm Holdings boasts a robust market capitalization of $145.55 billion, underlining its significant presence in the tech industry. Despite a towering P/E ratio, which currently stands at 466.17, the company's revenue has seen an impressive growth of 20.68% over the last twelve months as of Q1 2023, signaling strong business expansion.
InvestingPro Tips highlight that Arm's net income is expected to grow this year, and 7 analysts have recently revised their earnings upwards for the upcoming period, suggesting a positive outlook on the company’s financial performance. Moreover, the stock has experienced a significant return over the last week, with an 11.16% price total return, which aligns with the positive sentiment shared by Goldman Sachs. Investors should note that while the stock is currently trading at a high earnings multiple, this could be indicative of high growth expectations in the market.
For those looking to delve deeper into Arm's financials and future prospects, InvestingPro offers additional tips, with a total of 18 tips available for Arm Holdings. These tips provide a comprehensive analysis that can help investors make informed decisions. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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