Stock of Arm Holdings plunged after earnings, but analysts see potential for rebound

From MarketWatch: 2024-08-05 17:24:39

UK-based chip designer Arm Holdings plc (ARM) has seen its shares soar 25% on the first trading day, riding the AI wave. ARM’s chip designs are crucial for tech giants like AMD, Apple, Nvidia, and Qualcomm. Despite a recent 40% pullback in stock price, ARM’s inclusion in the Nasdaq-100 Index highlights its tech industry impact.

Arm Holdings, founded in 1990, boasts a market cap of $118.9 billion and powers over 290 billion chips worldwide. ARM stock has surged almost 48% in 2024, outperforming the S&P 500. But with a high forward P/E ratio of 147.73, some critics argue the stock is overpriced compared to industry peers.

After ARM’s fiscal 2025 Q1 earnings, the stock plummeted 15.7%. While revenue surged 39%, hitting $939 million, the company’s cautious full-year forecast disappointed investors. Nevertheless, analysts remain optimistic, with Bank of America and Citi both maintaining buy ratings and increasing price targets for ARM stock.

Analysts expect ARM’s stock to rebound despite the recent pullback, anticipating a potential upside of nearly 20% from current levels. The Street-high target of $190, set by Morgan Stanley, suggests a robust rally of up to 72.5% from the current price. The stock holds a consensus “Moderate Buy” rating from analysts, with varying perspectives on its future performance.



Read more at MarketWatch: Should You Buy the Dip in Arm Holdings After Earnings?