IB Net Payout Yields Model

Arm Holdings IPO Is Too Hot


Updated - Oct. 18, 2023
ARM Holdings definitely shouldn't have a $65 price target.

  • Shares of British chip design firm Arm Holdings (NASDAQ:ARMfell nearly 2% on Wednesday even as investment firm KeyBanc Capital Markets started coverage on the stock with an overweight rating.
  • A team of analysts, led by John Vinh, said they believe that Arm, which was spun out of SoftBank (OTCPK:SFTBY) earlier this year, will "increasingly benefit" from certain design trends in the semiconductor space, including rising chip complexity, due to compensating for the end of Moore's Law.
  • "ARM stands to benefit as computing requirements across mobile, data center, auto, and IoT become increasingly more demanding and complex; this will only increase the industry's reliance on Arm IP, ultimately resulting in royalty rate expansion and market share gains," the analysts wrote.
  • In addition to starting with an overweight rating, the analysts put a $65 price target on Arm, implying nearly 30% upside from current levels.

Finviz Chart

Update - Sept. 14, 2023

Arm hit $65.50 in after-hours trading. The stock valuation has now reached $68 billion. 

  • Arm Holdings plc had a successful IPO, raising over $5 billion for SoftBank and pricing at the top end of the range.
  • The IPO was the largest since Rivian Automotive raised $12 billion, indicating an ominous sign for initial investors.
  • Arm Holdings stock quickly jumped to $60 in initial trading, pushing its valuation to $60 billion and a very stretched 20x sales.
The IPO market has been shut for a while, yet Arm Holdings plc (NASDAQ:ARM) came out with a hot public offering today. The semiconductor stock priced at the high end of the range and jumped in initial trading. My investment thesis is ultra Bearish on the stock, though realizing some hot IPOs can run to extreme valuations.

Read the full article on Seeking Alpha. 

Disclosure: No position mentioned. Please review the disclaimer page for more details. 


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