By Angela Palumbo
Arm Holdings stock has had an impressive year, and Wells Fargo says demand for the chip designer's offerings can push the shares even higher.
Analyst Joe Quatroch initiated coverage of Arm with an Overweight rating and a target of $155 for the price. That implies a 16% increase from the stock's closing price of $133.14 on Thursday.
"We think Arm can deliver upside to consensus estimates driven by a transition to v9 / CSS solutions with higher royalty rates, coupled with modest share gains for Arm-based CPUs," Quatroch wrote.
Arm makes money by licensing its chip designs to semiconductor companies and smartphone makers. The company's latest advanced chip technology is the Armv9, which generates double the royalty rates of the previous Armv8.
Arm said in its annual report for the year ended March 31 that some of its customers are Advanced Micro Devices, Amazon Web Services, Alphabet, Intel, and Nvidia.
Quatroch's call on the stock comes after Arm's American depositary receipts have jumped 79% this year and 111% over the past 12 months. The stock has been a beneficiary of investor excitement over the future of generative artificial intelligence.
The Wells Fargo analyst isn't alone in his optimism. Of the 42 analysts surveyed by FactSet, 25 say the stock is a Buy, 13 rates it at Hold, and four say it is a Sell.
Arm's second-quarter earnings and revenue, disclosed on Nov. 6, beat Wall Street estimates. Arm also provided a solid revenue outlook, and Chief Executive Rene Haas wrote in a letter to shareholders that "demand for our high-performance Armv9 and CSS compute platforms continues to exceed expectations."
Arm's ADRs were up 1.2% on Friday to $134.79.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 22, 2024 12:33 ET (17:33 GMT)
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