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Wall Street sets ARM stock price for the next 12 months

Wall Street sets ARM stock price for the next 12 months
Elmaz Sabovic

It is hard to imagine a chipmaker stock that is currently performing better than Nvidia (NASDAQ: NVDA), but Arm Holdings (NASDAQ: ARM) is up by more than 116% since 2024 started, which is double when compared to NVDA’s gain of almost 50%.

The AI boom has spearheaded most of the stocks in the semiconductor industry, with profits and guidance reported by ARM seemingly driving its gains a week after their quarterly earnings reports were released.

Investors liked what they saw, with ARM gaining 93.44% since the quarterly report was announced on February 7.

What exactly stood out in the report?

The report spelled out an impressive performance, with Arm Holdings reporting quarterly earnings of 29 cents per share, surpassing analysts’ expectations of 25 cents per share. Revenue reached $824 million, exceeding the anticipated $761.62 million. The company’s EPS was 8 cents, with quarterly net income of $87 million.

ARM holdings quarterly results. Source: Arm Holdings
ARM holdings quarterly results. Source: Arm Holdings

Arm’s announcement likely stimulated investor interest even more regarding the potential to double its pricing for its latest instruction set, which constitutes 15% of the company’s royalties. This suggests a potential expansion of its margins and increased revenue from new chip offerings. 

Additionally, the company disclosed its entry into emerging markets such as cloud servers and automotive, which is attributed to the growing demand for artificial intelligence applications.

Wall Street projections for ARM stock

The surge that ARM stock experienced recently hasn’t gone unnoticed by analysts. However, the clarity surrounding Arm’s value is anticipated to increase next month with the 180-day post-IPO lockup period expiration, with Finbold listing it as one of the biggest IPO hits of 2023.

This has prompted analysts from TipRanks to thread carefully and award this stock with a ‘moderate buy’ rating based on 14 examinings. Of these, 9 advised a ‘buy,’ three to ‘hold,’ and two to ‘sell.’

The price target is $96, representing a -35.56% downside from the current level.

Price target prediction for ARM stock. Source: TipRanks
Price target prediction for ARM stock. Source: TipRanks

Bernstein analyst Sara Russo upheld a ‘sell’ rating on Arm and set a price target of $46, indicating a potential downside of -69.12% from the current level.

On the contrary, Thomas O’Malley at Barclays issued a ‘buy’ rating on ARM with a price target of $105.

Wells Fargo analyst Gary Mobley reaffirmed a ‘buy’ rating on ARM, setting a price target of $85.00. Mobley’s optimism is fueled by the expectation of third-quarter 2024 royalty revenue surpassing consensus estimates.

The analyst’s price targets are supported by SoftBank’s manipulation of low float, which has caused a squeeze in ARM stock. With SoftBank owning 91% of shares and only 5% available for trading, the impending IPO lockup expiration on March 12 could lead to substantial selling. Additionally, the current valuation of ARM seems inflated, prompting warning signs for traders.

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