Analysts Express Concern Despite 50% Stock Jump in Arm

In the chip world, there are two architectures: Intel and Arm. Arm is a company that holds patents on its architecture, making it the foundation for almost all chip designs. It has a significant market share in several fields such as cellular, vehicles, IOT, and data centers. Softbank owns about 90% of Arm shares and benefits from its success.

In 2020, Nvidia tried to purchase Arm from Softbank for $40 billion but was blocked by British and American regulators. Today, Arm’s holding is worth more than $100 billion. Last week, the company reported its results and exceeded analysts’ forecasts with an adjusted profit of 29 cents per share in the last quarter compared to 25 in forecasts and revenues of $824 million compared to expectations of $760 million.

The company expects revenue of $3.16-3.205 billion in 2024 while analysts expect it to bring in $3.05 billion. The new V9 chip design architecture is expected to contribute twice as much in royalties compared to the previous generation chip design architecture, with about 15% of customers already using V9 in the past quarter, an increase from 10% in the previous one. However, the sharp jump in Arm’s share price last weekend (50% in two days) could indicate pessimism among investors regarding the company’s future prospects. If three months ago 19 analysts recommended buying the stock, today this figure has dropped to 16 due to concerns about high valuations and competition from other companies like Nvidia or AMD that are cheaper options with lower earnings multiples such as Nvidia ($34), AMD ($32), and Intel ($19).

By Editor

Leave a Reply