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ARM Holdings PLC ADR ARM

Morningstar Rating
$181.18 +7.99 (4.61%)
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Company Report

Raising Arm Holdings' Fair Value Estimate to $66; Shares Overvalued

Arm Holdings does not sell chips, it develops CPU architecture and IP that it licenses to its clients. We believe Arm will remain the dominant architecture in smartphone CPUs, where it has a 99% market share, while maintaining high market share in other mobile chips and battery-powered devices. Arm is also making inroads into the data center, where we expect it will gain market share versus x86, the dominant architecture.

Price vs Fair Value

ARM is trading at a 519% premium.
Price
$181.18
Fair Value
$29.00
Uncertainty
High
1-Star Price
$879.70
5-Star Price
$82.70
Economic Moat
Fbm
Capital Allocation
Wjpsjtbv

Bulls Say, Bears Say

Bulls

We expect Arm will keep gaining market share in the data center from x86 architecture, as its chips consume less power and data centers need to minimize energy consumption. We also expect share gains in automotive thanks to the transition to electric vehicles.

Bears

If Arm manages to charge royalties on a per-device basis, or if it were to meaningfully increase its royalty rates per chip, it could become a double-edged sword. Too much royalty revenue may encourage customers to adopt open-source RISC-V instead.

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News

Trading Information

Previous Close Price
$173.19
Day Range
$173.50183.05
52-Week Range
$46.50188.75
Bid/Ask
$181.25 / $181.50
Market Cap
$189.85 Bil
Volume/Avg
9.0 Mil / 10.8 Mil

Key Statistics

Price/Earnings (Normalized)
150.82
Price/Sales
58.53
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield

Company Profile

Arm Holdings is the IP owner and developer of the ARM architecture (ARM stands for Acorn RISC Machine), which is used in 99% of the world’s smartphone CPU cores, and it also has high market share in other battery-powered devices like wearables, tablets, or sensors. Arm licenses its architecture for a fee, offering different types of licenses depending on the flexibility the customer needs. Customers like Apple or Qualcomm buy architectural licenses, which allows them to modify the architecture and add or delete instructions to tailor the chips to their specific needs. Other clients directly buy off-the-shelf designs from Arm. Off-the-shelf and architectural customers pay a royalty fee per chip shipped.
Sector
Technology
Industry
Semiconductors
Stock Style Box
Total Number of Employees
7,096

Competitors

Valuation

Metric
ARM
INTC
CDNS
Price/Earnings (Normalized)
150.8227.3762.73
Price/Book Value
35.601.3924.08
Price/Sales
58.532.6421.12
Price/Cash Flow
147.278.4760.31
Price/Earnings
ARM
INTC
CDNS

Financial Strength

Metric
ARM
INTC
CDNS
Quick Ratio
2.680.910.96
Current Ratio
2.791.571.32
Interest Coverage
0.8735.75
Quick Ratio
ARM
INTC
CDNS

Profitability

Metric
ARM
INTC
CDNS
Return on Assets (Normalized)
18.69%2.83%25.27%
Return on Equity (Normalized)
28.36%5.22%43.05%
Return on Invested Capital (Normalized)
25.25%3.23%35.56%
Return on Assets
ARM
INTC
CDNS
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