Arm Holdings
is a buy, according to a Wells Fargo analyst, who said licensing deals should power the chip maker’s growth.
Wells Fargo analyst Gary Mobley initiated coverage of
Arm
(ticker: ARM) on Monday with an Overweight rating and $70 price target, which implies a 27% upside from the stock’s closing price on Friday.
“We view
Arm
as one of the best positioned companies within the $550 billion global semiconductor industry,” Mobley wrote in a research note.
For fiscal 2024, Mobley believes that Arm should generate about 13% top-line growth, and attributes this to future licensing deals.
On the company’s fiscal second-quarter earnings call earlier this month, Chief Financial Officer Jason Child said Arm expected zero to 10% growth for licensing year over year for the third quarter, but looking ahead said the company expects “pretty significant growth because we do expect some pretty big license deals coming in Q4.”
Mobley also wrote in his research note that he expects revenue growth to accelerate in fiscal 2025, “mostly driven by a cyclical chip recovery as well as higher royalty rates.”
Arm is a British semiconductor company that went public on Sept. 14. Its customers include
Apple
(AAPL) and
Alphabet
(GOOGL). Earlier this month, Arm reported fiscal second-quarter financial results that beat estimates, but provided third-quarter revenue estimates of $720 million to $800 million. Wall Street was guiding for revenue of $776 million, according to FactSet.
BofA Securities analyst Vivek Arya wrote in a note after the earnings were released that the company’s outlook was “messy,” which came as a surprise. However, Arya maintained his Buy rating and $65 price target on the stock.
“Arm’s proven architecture and established ecosystem should help expand processor market share and royalty rate over the next three years, outgrowing peers and the broader market,” he said.
Shares of Arm were rising 5.5% Monday to $58.02 and were on pace for their highest close since Sept. 15, according to Dow Jones Market Data.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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