From Morningstar:

Arm Holdings released its earnings report on February 7. The current price of its stock is $126.40, with a Morningstar Rating of 1 star. They have a wide economic moat rating and high uncertainty rating. The earnings came in ahead of expectations, and guidance for the year has been raised.

Arm is diversifying outside the mobile market, with gains in the cloud and automotive sectors. The firm is raising its royalty rates, with v9 architecture double those of v8. This will allow Arm to capture more value and take a larger piece of the value chain. Therefore, their fair value estimate has been raised by 32% to $45.

Bulls believe that Arm will continue to gain market share in the data center and automotive businesses. There’s also potential for a huge revenue and margin upside if they change their business model. On the other hand, bears foresee possible risks, particularly with China’s financial reporting and revenue concentration.

According to Morningstar, Arm’s stock is significantly overvalued compared to their long-term fair value estimate. They project a 13% compound annual growth rate for the company over the next 10 years. Royalty rates for v9 could increase to more than 3% in 2030. At the moment, Arm’s average royalty rate is 1.7% and is expected to continue growing.



Read more: After Earnings, is Arm Holdings Stock a Buy, Sell…