Arm's stock hasn't gotten much love since it debuted last week, as another Wall Street broker advised investors on Friday not to buy at current levels.
Investors haven’t shown Arm Holdings PLC’s stock much love since it debuted last week, as another Wall Street broker recommended on Friday not to buy at current prices.
Since ending its first-day of trading at $63.59 on Sept. 14, or 24.7% above its IPO price, the semiconductor design company’s stock has tumbled 20.1% amid a six-day losing streak, to wipe out about $13.1 billion in market capitalization.On Friday, Susquehanna analysts Chris Rolland and Mehdi Hosseini suggested the stock could fall even further, as they launched co-coverage of Arm with a neutral rating and a $48 stock price target, which is 5.9% below the IPO price.
Hosseini said that for Arm to achieve a goal of 20% revenue growth a year, it has to boost blended licensing and royalty average selling prices by 3% a year, the shipment of chips needs to increase by 8% a year and new revenue opportunities, such as new system products have to grow from the current $0 to about $1 billion by fiscal 2027.
“We see the stock having fairly valued risk/reward,” the analysts said. “The company appears to be pushing royalty rates to the limit, while also adding lower margin ‘subsystems’ revenue.”
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