CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
We start our 12-month target price at $65, on peer-premium P/E of 37.8x our CY 25 EPS estimate at $1.72 to reflect ARM’s higher margin (+95% gross margin) as well as more recurring-based royalty and licensing businesses. We initiate our FY 24 (Mar.) EPS estimate at $1.05, FY 25 at $1.36, and FY 26 at $1.68. Our Hold reflects our view that ARM will remain highly dependent on the sluggish mobility market (+99% share) coupled with its elevated valuation but offset by the company’s rapidly expanding total addressable market (+$200B in CY 22; growing at a mid-single-digit percentage). Increasing emphasis on the cloud and automotive arenas (up 20% in the Sep-Q) represents opportunities, as we see greater compute intensity/content growth related to AI supporting upside to revenue. In addition, the transition to v9 architecture offers higher pricing while greater emphasis on energy efficiency helps drive momentum towards Arm architecture, taking share from x86’s dominance in markets like data centers as well as PCs.