Arm Receives Positive Analyst Attention from Raymond James
Shares of semiconductor architecture company Arm Holdings (ARM) experienced a significant rally, increasing by 5.4% as of 12:43 p.m. ET. This uptick follows a series of analyst upgrades throughout the week and was further bolstered by a favorable initiation from Raymond James analysts.
Raymond James initiated coverage on Arm, assigning a buy rating and setting a target price of $160. The analysts expressed optimism about the widespread future adoption of Arm’s V9 architecture, which is designed for neural processing in artificial intelligence (AI) applications and carries a price point double that of the previous generation. The anticipated proliferation of AI across various markets is expected to drive substantial benefits for Arm through V9 adoption.
Arm’s architecture is already integrated into Apple’s iPhone and Mac chips, with expectations that the new iPhone 16 will utilize the V9 for its Apple Intelligence services. Additionally, Nvidia incorporates Arm into its Grace CPU, which complements Nvidia’s Hopper and Blackwell GPUs in their AI data center server “superchip” reference designs.
Raymond James forecasts that Arm will make significant advances in the server market, particularly in low-power edge AI servers where Arm has historically had lower penetration. They also predict that Arm may eventually release a license for AI accelerators, which could lead to substantial upside, as currently, Arm’s technology is used exclusively in CPUs.
Despite these positive prospects, Raymond James set a relatively modest price target of $160, which is just 15% above the stock price at the beginning of the day and 8.2% above its current price. This conservative target reflects the high valuation of Arm’s stock, trading at 89 times the earnings estimates for 2025 as of today. Consequently, while Arm’s future appears promising, the current share price leaves little room for error.
Disclosure: Billy Duberstein and/or his clients hold positions in Apple. The Motley Fool holds and recommends positions in Apple and Nvidia. The Motley Fool has a disclosure policy.
