ARM share price falls despite double-digit rise in Q4 sales and profit

ARM Holdings Plc (LON:ARM) has seen a strong end to what has been a successful year for the British chip designer, with new designs helping the company overcome slowing demand for smartphones.

ARM reported earlier today, that its sales and profit had risen in the fourth quarter ended December 31, driven by wider adoption of its most advanced v8 architecture and the company’s increased focus on connected devices, also known as Internet of Things (IoT). The company’s Q4 revenue increased 19-percent year-on-year to £269.1 million, with the closely-watched royalty revenue measure up 36 percent at £143.5 million. Fourth-quarter pre-tax profit increased 17 percent to £138.7 million.

For the full year, ARM reported a 31 per cent rise in annual pre-tax profits to £414.8 million, with revenue up 22 percent to £968.3 million
ARM’s chief executive officer, Simon Segars, commented on the results: “2015 was a strong year for the shipment of chips containing advanced ARM technology, and momentum continued through the fourth quarter.” He added: “Demand for our technology is increasing, and during the quarter we signed multiple licences for the next generation of high-performance and secure ARM processors.”
Meanwhile, the company’s chief executive officer, Chris Kennedy, said that the company expected the v8 technology to continue to replace older designs and that it “will end up in every phone, even down in the low end”. Kennedy also said that based on current market conditions revenues for 2016 would be “broadly in line” with expectations, which stand at about $1.64 billion.
However, despite strong results, ARM’s share price took a significant hit today, after analysts at Liberum said that adjusted earnings had just missed forecasts. They also suggested that the company’s outlook sounded a bit cautious, noting that it was unusual for ARM to “use the word broadly”. The company’s stock has fallen as much as five percent today.
In today’s trading, ARM shares were down two percent at 921.00p, as of 12:42 GMT. The stock has fallen 11.3 percent since the start of the year and the company’s market capitalisation currently stands at nearly £13 billion.
The 22 analysts offering 12 month price targets for ARM have a median target of 1,200p, with a high estimate of 1,500p and a low estimate of 650.00p. As of February 06, 2016, the consensus forecast amongst 29 polled investment analysts covering ARM had it that the company will outperform the market. The same consensus estimate has been maintained since July 03, 2013, when the sentiment of investment analysts improved from “hold”.
As of 14:26 GMT, Wednesday, 10 February, ARM Holdings plc share price is 902.00p.