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Arm stock tumbled this summer
Arm’s (ARM) fiscal 2025 first-quarter results, reported on July 31, exceeded analysts’ forecasts, but the shares slumped due to tepid guidance.
The company earned 40 cents a share adjusted, beating Wall Street’s expectation of 34 cents. Its revenue of $939 million was up 39%, higher than analysts’ consensus forecast of $902.7 million.
Related: Analysts reboot Arm Holdings stock price target following earnings
However, Arm maintained its full-year guidance of adjusted earnings per share between $1.45 and $1.65, with revenue expected to range from $3.8 billion to $4.1 billion. Analysts had projected adjusted earnings per share of $1.58 and revenue of $4.02 billion.
Despite a 40% slump in July and August, Arm stock has about doubled this year.
The surge in artificial intelligence activity will continue to drive chip sales in the coming years.
“As the energy needs of AI continue to escalate, so does the demand for the high-performance, power-efficient Arm compute platform,” Haas said in a shareholder letter.
Arm a favored play on emerging Edge AI, Morgan Stanley says
A month ago, Bernstein upgraded Arm to market perform from underperform with a price target of $100, up from $92, following the 40% drop.
Bernstein said on Aug. 7 that Arm’s valuation needed to be revisited, given the share price’s 40% drop in four weeks and more confidence in mobile royalty growth.
Bernstein says V9 products will contribute significantly to the company’s royalties, reaching 40% by the end of fiscal 2025. The analyst said Arm was gaining market share in the cloud-computing sector. Given these developments, Bernstein views the stock’s potential risks and rewards as more evenly balanced at its current price.
Morgan Stanley affirmed a positive outlook toward Arm stock following the iPhone 16 release on Aug. 12 because of the utilization of Arm’s chip design.
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“Arm remains a favored play on the emerging Edge AI opportunity,” Morgan Stanley’s analyst Lee Simpson said, expecting mobile to drive initial upside, followed by infrastructure and autos.
Morgan Stanley affirms a $175 price target with an overweight rating on Arm stock.
On Sept. 5, according to TheFly, the investment firm named it a Joint Top Pick along with ASM International (ASMIY) . For ASM International the analyst cut the price target to 725 euros ($801) from 800 euros.
And Morgan Stanley affirmed an overweight rating on ASML Holding (ASML) while cutting its price target on the stock to 925 euros from 1,000 euros and removing it as a Top Pick, TheFly reported.
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