Shares of Arm Holdings (ARM, Financial) surged 6.21% today after receiving a bullish initiation from analysts at Raymond James.
Raymond James initiated coverage on Arm with a "buy" rating and a $160 price target. Analysts cited widespread future adoption of Arm's V9 architecture, optimized for neural processing in AI applications, as a key growth driver.
Arm's architecture is used in Apple's iPhone and Mac chips, with the new iPhone 16 reportedly featuring V9 to support new Apple Intelligence services. Nvidia also utilizes Arm for its Grace CPU, which complements its Hopper and Blackwell GPUs in AI data center servers.
Raymond James sees potential for Arm to expand its presence in the server market, particularly in low-power edge AI servers. Analysts also anticipate the possible release of a license for AI accelerators, presenting additional upside potential.
In terms of valuation, Arm Holdings (ARM, Financial) is currently priced at $147.82 with a market capitalization of $154.92 billion. The stock has shown a substantial year-to-date increase of 96.99% but experienced a 6.34% decline over the last 12 weeks. While Arm's price-to-earnings ratio is notably high at 379.03, it maintains strong financial health with a debt-to-equity ratio of just 0.04 and a robust Altman Z-score of 41.36.
Despite some warning signs, such as a declining operating margin and a return on invested capital (ROIC) lower than its weighted average cost of capital (WACC), Arm has shown consistent revenue growth. The stock's GF Score is 54, and for further insights on its valuation, refer to the GF Value page.
Overall, Arm Holdings displays a mix of strong growth potential and some cautionary metrics, making it a stock to watch closely.
