Arm Holdings (NASDAQ: ARM) is a prominent player in the global semiconductor industry, well-known for its innovative and cutting-edge technology solutions. The company’s storied history traces back to its foundation in 1990, and it has since evolved to become a key influencer in the tech world.
The Nasdaq-listed company’s technology is integral to the operation of billions of devices worldwide. The company’s intellectual property and semiconductor designs are utilised in a diverse range of products, from smartphones and tablets to embedded systems and enterprise infrastructure.
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Arm EPS and Revenue Breakdown 2020-2023
[Due to Arm listing in September 2023, we don’t have full financial data]
| Arm | Annual EPS | Annual Revenue |
|---|---|---|
| 2020 | $ | $2.03 billion |
| 2021 | $ | $2.70 billion |
| 2022 | $ | $2.68 billion |
| 2023 | $ | $ _ billion |
Arm Holdings, previously known as Advanced RISC Machines Ltd, has a notable history in the semiconductor industry. The company was founded on November 27, 1990, as a joint venture between Acorn Computers, Apple, and VLSI Technology. According to Arm’s blog site, the “reason for this was because Apple wanted to use Arm technology but didn’t want to base a product on Acorn IP – who, at the time were considered a competitor.”
Since then, the company’s growth has been evident as it opened offices in Silicon Valley and Tokyo in 1994 and invested in Palmchip Corporation in 1997 to enter the system on chip platforms and disk drive market.
Arm Holdings first IPO’d on April 17th, 1998, in a joint listing on the London Stock Exchange and NASDAQ with an IPO at £5.75. Then, in 2016, the company once again went private when Japan’s SoftBank acquired it for $32 billion. In September 2023, Softbank took Arm public once again, listing it on the Nasdaq and can also be found under ticker $Arm. However, Softbank still owns approximately 90% of the chip designer’s outstanding stock.
Semiconductor Industry Comparison
Arm Holdings operates across various segments, including processor IP, tools and software, and physical IP. In the processor IP segment, Arm’s focus on energy-efficient designs has solidified its position as a leader in the mobile and embedded markets.
The company’s tools and software offerings cater to developers, enabling them to harness the power of Arm’s architecture for diverse applications. Furthermore, Arm’s physical IP solutions are essential to the realisation of semiconductor designs, helping its partners create custom SoCs (System on Chips) tailored to their specific needs.
ARM Chart
Arm’s recent IPO means its recent share price history doesn’t stretch too far back. However, as with most other semiconductor stocks, it has made solid gains over the last few months. The stock’s recent rise has been, in part, fuelled by the rise and demand for artificial intelligence, which has helped push share prices in the industry and related companies higher.
Arm Stock Price Forecast
In a recent analyst note, Mizuho raised its price target for Arm to $160 from $100 per share, maintaining a Buy rating on the stock. The firm said even though Arm shares have moved significantly following its initial public offering, it continues to see “significant upside opportunities” due to further custom silicon and mobile upside.
On the other hand, analysts at New Street downgraded Arm to Neutral in a recent note, assigning the stock a $110 price target, which represented a potential 26% downside (at the time). New Street said that “even with a generous 40x multiple on our above-consensus expectations,” they don’t see a rationale to buy Arm’s stock above $110 per share.
Our View: Given its industry, Arm is gaining some ground due to the rise of AI. It has pulled back slightly since its high on February 12, and investors should assess whether its valuation is potentially stretched.
Who Might Buy ARM
Investors who are looking for a combination of growth and stability may find Arm Holdings shares to be a suitable investment. Arm specialises in designing microprocessors and other intellectual property for a range of devices, including smartphones, tablets, and Internet of Things (IoT) devices. As a result, it operates in a rapidly growing industry with significant potential for expansion.
Another factor investors should consider when deciding whether to buy Arm shares is their risk tolerance. As with any investment, there is a certain level of risk involved. However, Arm has a solid track record of financial performance and has demonstrated its ability to adapt to changing market conditions. Even so, many market participants have expressed concerns regarding its exposure to China. Nearly a quarter of Arm’s revenue comes from an entity it relies on to access China’s smartphone market. However, it does not control that company.
Furthermore, investors should also assess whether Arm shares fit into their overall investment strategy. If they are looking for growth stocks that have the potential for significant capital appreciation over the long term, Arm could be a good fit. However, Arm does not pay a dividend, so the stock will not suit those looking to boost their dividend portfolio.
The stock may also experience short-term fluctuations in response to market conditions or company-specific factors. Investors who are willing to hold onto their shares for an extended period of time may be better suited to benefit from Arm Holdings’ long-term growth potential.
