ARM share price rises on royalty sales growth and higher Q4 profit

on Feb 11, 2015
Updated: Oct 21, 2019

ARM Holding Plc (LON:ARM) today posted better-than-expected quarterly earnings, helped by an acceleration in royalty revenue from key clients such as Apple Inc (NASDAQ:AAPL). The company said that its pre-tax profit for the final three months of the year ended December 31 was £118.9 million, up 25-percent from a year earlier. Analysts had been expecting pre-tax profit of £113 million, according to a consensus of estimates compiled by Thomson Reuters.

The company’s Q4 royalty revenue, a closely-monitored measure, as reported in US dollars, was 13 percent up at $165.5 million. This marked the end of a five-quarter period of slowing royalty revenue growth for the company.
ARM expects that the acceleration will be maintained in the first quarter and will contribute to a 10-percent rise in Q1 revenue.The company’s total revenue in the fourth quarter rose 18 percent to $357.6 million, with royalty revenue accounting for 46 percent of that. Licensing revenue accounted for roughly the same percentage, after rising 27 percent to $162.3 million, mainly due to 53 licences signed for processors.

ARM chief executive officer Simon Segars commented in a statement: “In Q4 and throughout 2014 ARM has seen strong licence revenue growth, driven by market-leading semiconductor companies increasing their commitment to use ARM technology, and a broadening range of new customers choosing ARM technology for the first time.”
In today’s trading, ARM shares surged four percent to 1,098.23p, as of 11:42 UTC. The stock has risen 10.4 percent since the start of the year.

According to the Financial Times, the 21 analysts offering 12 month price targets for ARM have a median target of 1,100p, with a high estimate of 1,500p and a low estimate of 700.00p. As of February 09, 2015, the consensus forecast amongst 37 polled investment analysts covering ARM has it that the company will outperform the market. This stance has been maintained since July 03, 2013, when the sentiment of investment analysts improved from “hold”.
As of 12:32 GMT, Wednesday, 11 February, ARM Holdings plc share price is 1,093.50p.

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