Arm stock price forecast: is $ARM overvalued?

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on Jun 18, 2024
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  • Bank of America sees upside in Arm Holdings to $180 per share.
  • Analyst Vivek Arya explained why in a research note today.
  • Arm stock has gained over 150% since the start of this year.

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Arm Holdings PLC (NASDAQ: ARM) has gained more than 150% since the start of this year but a Bank of America analyst expects the rally to further in the coming months. 

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Arm stock has upside to $180

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Vivek Arya reiterated his “buy” rating on the chip designer and raised his price objective this morning to $180 which translates to about a 13% upside on its previous close. 

The Bank of America analyst is bullish on Arm stock primarily because the British multinational is stealing market share from the likes of Intel and even Advanced Micro Devices (AMD). 

He sees ARM shares as well positioned for further gains on accelerated adoption of its V9 architecture as well. 

Arm Holdings does not, however, pay a dividend at writing. 

What could help ARM shares moving forward?

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Vivek Arya expects the V9 architecture to lift royalty rates by up to 5.0% for Arm Holdings while its complete compute solution, he added, could boost rates by up to 10%. 

The Bank of America analyst recommends owning Arm stock because it will gain market share on more widespread adoption of its technology that will improve power efficiency of processors for data centre applications. 

His new price target is based on a 95 times forward multiple versus 79 times he applied previously. 

Note that the investment firm also raised his price objective on Micron Technology today to $170 which translates to an over 10% upside from here. 

Arm to reveal AI chips in 2025

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All in all, BofA’s Arya forecasts Arm stock to benefit on the back of the broader commitment to on-device AI capabilities. 

Microsoft has already announced new devices with AI capabilities and Samsung is also expected to exclusively use Qualcomm chips in its upcoming more AI capable Galaxy S25.

In May, Arm Holdings reported its financial results for the fourth quarter that topped Street estimates and issued upbeat future guidance as well. CEO Rene Haas said at the time:

We finished our financial year with strong tailwinds as AI is driving increased demand. All AI models run on Arm compute platform. As these models become larger, their requirements for more compute with greater power efficiency can only be realised through Arm.

Arm stock may be worth owning at writing because the company is expected to unveil its own AI chips next year as well. 

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